Market Pulse April
Market Pulse April
Market Pulse April
When uncertainty is elevated, we build playbooks for multiple potential outcomes. Our baseline expectation is for clarity on energy supply by mid-April, with Brent prices peaking at $115 before recovering to $80 by YE. The growth/inflation implication of such a short-term shock would be manageable, with 2026 global GDP growth of 2.4% and core inflation at 2.3%. The FOMC, with its dual mandate, may continue to cut, while the price-focused ECB may raise rates rather than stay on hold.
If energy disruption continues until May, oil prices may test new highs at $140+ and stay above $100 through YE. GS Research estimates that every $10 increase in oil is a ~10bp drag on growth and adds 3-6bp and 20bp to core and headline inflation, respectively. The impact would not be equal across economies, with energy shortages a concern in some places in addition to elevated prices.
The risk is not linear, with prolonged conflict leading to more production shut-ins and damage to facilities that may take months if not years to recover. A higher for longer oil regime would have significant impacts across global economies and markets.
Source: Macrobond and Goldman Sachs Asset Management. As of March 31, 2026. Energy supply shocks include Arab Oil Embargo (17 October 1973), Iranian Revolution (20 October 1978), Iran-Iraq War (22 September 1980), Gulf War/ Iraq's Invasion of Kuwait (2 August 1990), Russia-Ukraine War (24 February 2022). Short-lived geopolitical shocks include 9/11 terror attacks (11 September 2001), US invasion of Iraq (20 March 2003), Iran-Israel escalation (1 October 2024), and Israel strikes Iran (13 June 2025). Past performance does not predict future returns and does not guarantee future results, which may vary. For illustrative purposes only.
Historically, global equities have recovered from short-lived geopolitical shocks quite quickly as fundamentals take over from headlines. Today’s strong earnings outlook and tailwinds from AI and fiscal spend still make for a constructive backdrop once geopolitical risks fade. However, the longer the conflict lasts, the more challenging the growth/inflation/sentiment mix becomes. For now, the US appears relatively insulated, while DM ex-US and EM may be poised for a rapid reversal once the conflict clears.
Rates have rapidly priced inflation risk, with yields backing up across curves. We now see potential opportunities, particularly at the front end in the US and UK, if policy is less hawkish than expected. A faster resolution, or a protracted conflict leading to growth concerns overtaking inflation, may be paths to rate relief. Credit spreads remain tight and heavy supply poses a headwind, but earnings continue to support fundamental strength.
The US dollar index has risen 2.3% since February 27, benefiting from a flight to safety, positive terms of trade, and the fact that oil markets transact in USD. We would expect the dollar to continue to outperform while uncertainty is elevated but resume its downward trend as conditions normalize.
Asset Class Forecasts: Price targets of major asset classes are provided by Goldman Sachs Global Investment Research. As of April 6, 2026.
Evaluating Energy Disruption
The conflict in the Middle East has produced the largest energy disruption in history, with 20% of global oil trade being disrupted and more than 10% of oil production now shut in. The impact on global economies and markets will ultimately depend on the duration and severity of the disruption, but there are a few structural factors currently working in investors’ favor. Global economies are less oil intensive today and are starting from a better position, though the impact will likely be felt disparately across countries.
Source: Bloomberg and Goldman Sachs Asset Management. As of March 31, 2026. Chart compares US macro conditions at the outset of today’s conflict in the Middle East versus the average starting conditions across 6 major oil supply disruptions, namely the Yom Kippur War (1973), Iranian Revolution (1978), Gulf War (1990), Iran War (2003), Russia-Ukraine War (2022), and the current conflict. The unemployment rate reflects the average over the past 3 months, while the inflation target refers to the Fed’s 2% target.
Historically, oil shocks have magnified existing economic imbalances. The starting point in the US today appears relatively stable. Growth is tracking above potential; inflation is much closer to target than in past periods; the labor market is near trend, if a little soft; and monetary policy is still relatively tight. We think this backdrop would allow the Fed to continue its path of normalization cuts in 2026 as headline fog fades and the macro picture clarifies.
Source: World Bank and Goldman Sachs Global Investment Research. As of March 31, 2026. Chart shows the energy intensity of the global economy, as calculated by petroleum consumption per unit of GDP, indexed to 1965.
Global economies today are powered differently than during large disruptions in the past. The oil intensity of the global economy – the barrels of oil required to generate a unit of GDP – has fallen by more than 60% since the 1970s, as a result of efficiency improvements, technologization, and a shift to alternative energy sources. That means that an oil shock today may have a relatively more modest growth impact than in the past.
Source: IEA and Goldman Sachs Asset Management, As of March 31, 2026. Chart shows the net share of primary energy coming from imports. Negative values indicate that an economy is a net energy exporter.
Still, the impact of energy disruption will not be felt equally. Net energy exporters like Brazil or the US may be relatively more resilient than net energy importer peers. China and the EU have made progress with renewables in recent years, in part to de-risk power supplies, but remain vulnerable to an energy shock. We believe the variability of macro sensitivities (growth, inflation, rates, currencies) should create an opportunity for alpha generation across portfolios in both equities and fixed income.
