In September 2026, markets experienced some volatility due to conflict in the Middle East and the impact it had on energy prices. Discover other factors that may have affected the performance of your portfolio.
Markets got off to a weak start on 1 September. A global government bond sell-off, caused by concerns about inflation and government debt, led to markets falling. Among the indices affected by the dip were London’s FTSE 100 and Germany’s DAX, both of which were down by 1.1%.
Asian markets were also impacted by the sell-off when they opened. On 2 September, it was reported that Japan’s Nikkei 225 index was down 2.7%, while South Korea’s KOSPI (-3.3%) and China’s CSI 300 (-1.4%) also fell.
Concerns about rising energy prices led to European markets falling on 8 September. Unsurprisingly, energy companies bucked this trend, with FTSE 100 firms BP (0.8%) and Shell (0.35%) opening higher.
This continued on 9 September, when it was reported that UK and European gas prices had surged to multi-year highs as oil reached $100 per barrel. British gas prices were reportedly at their highest level since late December 2022. While the FTSE 100 was down 0.6%, energy firms once again were among the only businesses to see share prices rise.
For several months, worries about AI companies being overvalued have affected markets, and this concern reared its head again on 14 September.
AI-linked stocks slowed down, which affected share prices across the globe. For example, in Tokyo, SoftBank, a major AI investor, saw its share price fall by 13%, and chipmaker SK Hynix, which is listed in South Korea, fell 5.75%.
European markets weren’t spared. The STOXX Europe 600 index fell 2.3% between 31 July and 14 September following calls for the AI industry to slow down for safety reasons.
Trade tensions between the US and China have contributed to volatility throughout 2026. However, on 21 September, trade talks between the two nations, coupled with oil prices declining, led to investor optimism that provided a welcome boost to Asian markets.
UK
UK GDP beat forecasts with 0.4% growth in July, putting the economy on track for a stronger-than-expected third quarter of 2026. The boost was supported by AI activity, high temperatures throughout the summer, and the FIFA World Cup. The figure represents the fastest pace of growth since February 2025.
However, inflation remained high. In the 12 months to August 2026, inflation was 3.1%. Despite inflation being above the Bank of England’s (BoE) 2% target for months, the central bank opted to hold interest rates where they were.
However, market experts from IG expect the BoE to increase interest rates four times by July 2027, including a rise this year.
Purchasing Managers’ Indices (PMI), which provide an economic indicator of business activity, were above the 50 mark that indicates growth for the manufacturing and service sectors. Nevertheless, both sectors face challenges as inflation will affect input costs.
Indeed, 31% of service sector businesses said costs were rising, compared to just 1% that noted a fall.
Europe
Eurozone inflation hit a three-year high of 3.2% in the 12 months to August. The increase was linked to rising energy costs and put it well above the European Central Bank’s (ECB) target of 2%. In response to the inflation data, the ECB increased interest rates for the second time this year in a bid to bring inflation under control.
There was good news from other economic data.
The eurozone private sector growth hit a three-and-a-half-year high, helped by AI activity and defence spending. The PMI reading was 53.
Manufacturing PMI was also positive at 52.7. The reading was the highest in more than four years, with the bloc’s largest economies, Germany and France, both enjoying strong growth. Export sales were also up for only the second time in four and a half years, with particularly strong performances in Austria, Germany, and the Netherlands.
US
US inflation fell slightly to 2.4% in the 12 months to August 2026, though it remains above the 2% target.
Despite pressure from President Donald Trump to slash interest rates, the Federal Reserve raised interest rates for the first time in three years. The hike will see interest rates of 3.75% – 4% after a quarter of a percentage point increase.
Asia
Japan’s central bank was among those hiking interest rates in September. The quarter-percentage-point increase to 1.25% means the country’s interest rates are at the highest level since 1995.
China’s economic indicators suggest that the country’s growth is slowing down. For example, consumption and investment are both underperforming, though notably exports and industrial production are stronger than expected. Policymakers are facing renewed pressure to increase stimulus spending as a result.
The long-awaited initial public offering from fast fashion giant Shein may be a disappointment to investors. The company’s shares listed in Hong Kong tumbled at the start of the month. The company has been affected by regulatory changes in the US and the EU, which could remove reduced import duties on small packages.
Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
