Global funds sector review – AI, inflation and oil prices

Conflict in the Middle East has dominated headlines in the first half of 2026. But you wouldn’t know it from a glance at the huge stock market returns over the last 12 months.

So, has the war in Iran mattered for markets? And, if military action in the Middle East hasn’t been driving performance, what has?

This article isn’t personal advice. If you’re unsure whether an investment is right for you, ask for financial advice. Investments can fall as well as rise in value, so you could get back less than you invest.

How did the war affect financial markets?

For investors, the first effect of the war was a spike in oil prices. Rising energy costs led to expectations that prices would rise more generally, pushing up inflation. The oil price has since come down, but inflation figures may not fall just yet. After-effects may persist, particularly in the form of central banks taking action.

Some have indicated that they might keep interest rates at current levels or even raise them if inflation starts to gather pace. This is a change in the narrative from the start of 2026, when central banks in the US and UK were expected to cut interest rates throughout the year.

All things being equal, you would expect higher energy costs and higher interest rates to be bad news for stock markets. Higher energy costs push up prices, and higher interest rates make cash and bonds more appealing and suck money out of the stock market. But the impact on stock markets was short-lived. After falling through most of March, the MSCI AC World index, a collection of 23 developed and 24 emerging markets, rose steadily from April to June, more than erasing the previous losses.

What has driven the stock market’s growth?

The dominant market theme in 2026 to date is artificial intelligence (AI). Hyperscalers, like Amazon and Alphabet, continue to invest large amounts in AI solutions, through building out cloud infrastructure and developing models. But market attention has moved on to the companies receiving this cash.

Semiconductor companies, which manufacture chips used to power AI tools, have experienced significant share price growth in the past 12 months. These companies haven’t been able to produce chips at the same rate as demand for them is increasing. This has allowed them to raise prices and make more profit.

Companies like Samsung Electronics and SK Hynix in Korea, and Micron and Advanced Micro Devices in the US, have grown to be among the largest companies in the world.

But oil price driven inflation hasn’t left the stock market completely unscathed.

The consumer discretionary sector has not fared as well.

Businesses like online retailers, luxury brands, and hotels are more sensitive to broader economic conditions. With inflation persisting at higher levels, consumers may have less money to spend on non-essentials.

How have Wealth Shortlist funds performed?

The global equity funds on the Wealth Shortlist have delivered varying returns over the past 12 months. We expect this, as managers have different styles and areas of focus, which perform differently in different economic conditions. Past performance isn’t a guide to the future, and the performance here is over a short period of time.

Investing in funds isn't right for everyone. Investors should invest only if the fund's objectives are aligned with their own and there's a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest and make sure that any new investment forms part of a diversified portfolio.

For more details on each fund, its charges, and specific risks, please see the links to their factsheets and key investor information below.