September proved challenging for global investors as geopolitical uncertainty, higher energy prices and rising bond yields combined to put pressure on markets. The ongoing conflict involving the United States and Iran continued to disrupt energy markets, with Brent crude rising 14.4% during the month. Higher oil prices brought inflation risk back into focus at a time when investors had been hoping that easing price pressures would allow central banks to become more supportive.

The result was another sharp adjustment in interest-rate expectations. The US Federal Reserve raised rates by 25 basis points, its first increase in three years, as policymakers remained concerned that higher energy prices, large fiscal deficits and strong investment spending could keep inflation elevated. Bond markets reacted accordingly, with the US 10-year Treasury yield reaching 5.30%, its highest level since 2002.

Global equities generally struggled against this backdrop, although the headline numbers masked a significant divergence beneath the surface. Developed market equities declined 1.1%, while emerging markets fell 0.5%. The S&P 500 was comparatively resilient, slipping just 0.3%, while the technology-heavy NASDAQ 100 gained 3.3%. Europe and the UK were weaker, with the Euro STOXX 50 declining 2.2% and the FTSE 100 falling 2.0%, while Japan’s Nikkei 225 gained 1.3%.

Technology remained a notable exception to the broader weakness. Artificial intelligence continued to attract significant investment, particularly in the infrastructure required to support its development. At the same time, the conversation around AI began broadening beyond its investment potential towards governance, regulation and the management of emerging risks. The continued strength of technology shares, despite rising yields and weaker broader markets, highlighted just how concentrated market leadership had become.

Commodity markets provided another clear illustration of September’s changing environment. Brent crude surged 14.4% as markets responded to continued supply disruptions, while gold declined 6.2% as higher real interest rates weighed on demand. The combination of rising oil prices and higher bond yields created a particularly uncomfortable backdrop for investors, as both inflation expectations and the cost of capital moved higher at the same time.

September ultimately reinforced an important point for long-term investors: strong economic activity does not always translate into strong market returns. When inflation remains elevated, economic resilience can keep interest rates higher for longer and place pressure on valuations. At the same time, the significant divergence between technology, broader equities, bonds and commodities demonstrated why maintaining diversification remains important when markets are being pulled in different directions.