ALTERNATIVE MARKETS UPDATE – END MARCH 2026

​Over the past two weeks, the Iran war has entered a more intense yet increasingly fluid phase, characterised by sustained US–Israel airstrikes that have significantly degraded Iran’s missile and military infrastructure while leaving residual retaliatory capacity intact. More recently, however, the US has reportedly scaled back or suspended parts of its strike activity, coinciding with early-stage, indirect peace negotiations that are allegedly taking place, suggesting a potential tactical pause rather than a definitive de-escalation. At the same time, escalation risks remain elevated, with contingency planning for ground operations still on the table and ongoing proxy activity across the region reinforcing the threat of a broader multi-front confrontation. Strategic pressure on key infrastructure and maritime chokepoints persists, while conditions within Iran continue to deteriorate amid infrastructure damage and mounting humanitarian strain. Overall, the conflict appears to be transitioning from peak intensity towards a more uncertain phase balancing military pressure with tentative diplomatic engagement.

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RESEARCH PERSPECTIVE VOL. 272 March 2026 Alternative Markets Update Over the past two weeks, the Iran war has entered a more intense yet increasingly fluid phase, characterised by sustained US–Israel airstrikes that have significantly degraded Iran’s missile and military infrastructure while leaving residual retaliatory capacity intact. More recently, however, the US has reportedly scaled back or suspended parts of its strike activity, coinciding with early-stage, indirect peace negotiations that are allegedly taking place, suggesting a potential tactical pause rather than a definitive de-escalation. At the same time, escalation risks remain elevated, with contingency planning for ground operations still on the table and ongoing proxy activity across the region reinforcing the threat of a broader multi-front confrontation. Strategic pressure on key infrastructure and maritime chokepoints persists, while conditions within Iran continue to deteriorate amid infrastructure damage and mounting humanitarian strain. Overall, the conflict appears to be transitioning from peak intensity towards a more uncertain phase balancing military pressure with tentative diplomatic engagement. The escalation in the Iran war has had a tangible impact on global markets, primarily through the energy and risk sentiment channels. Elevated uncertainty around supply disruptions and maritime chokepoints has supported oil prices and reinforced inflationary concerns, while broader geopolitical risk has contributed to increased volatility across equities, FX, and rates. At the same time, intermittent signals of de-escalation, including the recent pause in US strikes and reported negotiations, have led to sharp, short-term reversals, creating a more fragmented and headline-driven market environment. In this context, hedge funds have demonstrated their relative advantage, benefiting from tactical flexibility, cross-asset positioning, and the ability to monetise volatility. Recent performance data indicates strong gains among macro and commodity-focused managers, with some energy specialists reportedly generating outsized weekly returns (e.g., high single-digit gains driven by oil price moves). More broadly, discretionary global macro and multi-strategy funds have been well positioned to capture both directional trends and short-term dislocations, particularly across commodities, FX, and rates. This reinforces the role of hedge funds as effective allocators in geopolitically driven markets, where dispersion, volatility, and rapid narrative shifts create a more favourable opportunity set compared to traditional long-only strategies. Energy markets have been the primary transmission channel of the conflict, with Brent and WTI crude oil surging by roughly 70% YTD, as shown in Figure 1. This is mainly driven by supply disruption risks, constrained tanker flows, and the strategic importance of Middle Eastern production and transit routes. The divergence across natural gas markets has been equally pronounced: European gas prices have risen nearly 100%, reflecting heightened import dependency and sensitivity to global LNG flows, while US natural gas is down around 20%, highlighting domestic oversupply and relative insulation from geopolitical shocks. This widening regional dispersion underscores a structurally fragmented energy landscape, where pricing is increasingly dictated by geography, infrastructure constraints, and exposure to global trade routes rather than purely underlying demand dynamics. Figure 1: Crude Oil and Natural Gas Price Since January 2026, Source: Investing.com, March 2026 Precious metals have exhibited significant volatility following their earlier safe-haven rally, with gold retracing sharply from near-record highs at the end of February, declining by around 20% and now only marginally positive year-to-date. The move has been driven by investors retreating from gold amid concerns over rising cross-asset correlations in a downturn, alongside an increased preference for liquidity and cash reserves, which has reduced demand for traditional safe-haven allocations. Silver has seen even more pronounced swings, having briefly exceeded 60% gains in late January before reversing sharply and turning negative for the year, reflecting its higher beta and dual role as both a precious and industrial metal. Overall, the correction in both metals underscores a shift away from crowded defensive trades towards a more liquidity-focused and tactically driven market environment. Figure 2 shows the extreme swings in the commodities’ market alongside the performance of the largest cryptocurrencies. Cryptocurrencies have shown a relatively resilient but synchronised pattern in recent months, with Bitcoin, Ethereum, and Solana moving largely in tandem through early February before entering a broader correction phase. During this downturn, Bitcoin proved comparatively defensive, experiencing less severe drawdowns than higher-beta assets such as Ethereum and Solana. Notably, since this initial decline, crypto markets have stabilised, with prices consolidating despite ongoing geopolitical tensions, including the Iran war, suggesting that much of the macro-driven repricing had already occurred earlier in the year and that the asset class is currently trading in a more balanced, range-bound environment. Figure 2: Gold, Silver and Cryptocurrency (BTC, ETH, SOL) Prices Since January 2026, Source: Investing.com, March 2026 US equities entered the year on a relatively muted footing, with the Dow Jones Industrial Average briefly outperforming and rising around 4% by mid-February, while both the S&P 500 and the Nasdaq-100 faced early pressure amid growing concerns around AI-related spending, monetisation risks, and broader valuation sustainability in the technology sector. Since the onset of the Iran war, US equity markets have trended lower in a more gradual fashion, partially cushioned by intermittent stabilisation efforts and policy signalling from Donald Trump. Nevertheless, the overall direction has remained negative, with the Nasdaq now down more than 10%, the S&P 500 approximately 7% lower, and the Dow Jones declining around 6%, reflecting a combination of geopolitical uncertainty, risk-off sentiment, and continued repricing of growth expectations. Figure 3 shows the performance of US equities in 2026 so far. Figure 3: Dow Jones, S&P 500, and Nasdaq Index Since January 2026, Source: Investing.com, March 2026 Inflation dynamics in the US are beginning to shift again, with headline inflation currently at 2.4% and expectations for March rising to around 2.9%, signalling renewed upward pressure on prices. Should the Iran war persist, inflation is likely to re-accelerate further, driven primarily by higher energy costs and second-round effects across supply chains. Against this backdrop, the policy narrative has moved away from rate cuts towards a renewed discussion of potential rate hikes, reflecting concerns over inflation persistence. This shift is increasingly visible in rates markets: While the 3-month US Treasury yield has remained broadly stable throughout 2026 so far, the 10-year yield has risen by nearly 50bps, indicating a repricing of long-term inflation expectations and a structurally higher-for-longer interest rate outlook. Figure 4 provides more context about the Treasury yield developments in 2026 thus far. Figure 4: US Treasuries and Inflation (Expectations) January 2026, Source: Investing.com, March 2026 STONE MOUNTAIN CAPITAL Stone Mountain Capital is an advisory boutique established in 2012 and headquartered in London with offices Pfaeffikon in Switzerland, Tallinn in Estonia and Dubai and Umm Al Quwain in United Arab Emirates. We are advising 30+ best in class single hedge fund and multi-strategy managers across equity, credit, and tactical trading (global macro, CTAs and volatility). In private assets, we advise 10+ sponsors and general partners across private equity, venture capital, private credit, real estate, capital relief trades (CRT) by structuring funding vehicles, rating advisory and private placements. As of 14th June 2025, Stone Mountain Capital has total alternative Assets under Advisory (AuA) of US$ 62.9 billion. 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