Global equity markets hit records as oil surges past $120, testing KiwiSaver resolve

Key facts

• MSCI World Index rose 9.5% in April, strongest monthly return since 2020.
• S&P 500 gained over 10% in April; Nasdaq surged more than 15%.
• Brent crude oil spiked above $120 per barrel, an 80% increase.
• Middle East conflict escalated over two months ago, triggering initial sell-off.
• Federal Reserve, ECB, Bank of England, Bank of Japan, Bank of Canada all held interest rates recently.
• Reserve Bank of New Zealand adopted similar wait-and-see approach.
• New Zealand stock market did not participate fully in global rally due to softer domestic backdrop.
• Strong corporate earnings, especially in technology, and AI investment drove market resilience.

Markets climb a wall of worry

Global equity markets have reached record highs in April, even as geopolitical tensions in the Middle East pushed oil prices above $120 a barrel. The MSCI World Index posted its strongest monthly gain since 2020, rising 9.5%, while the S&P 500 climbed over 10% and the Nasdaq surged more than 15%. The rally has unfolded against a backdrop of an 80% spike in Brent crude and persistent uncertainty over the conflict's trajectory. For KiwiSaver investors, the volatility has been a test of nerve. When the Middle East conflict escalated just over two months ago, risk assets sold off sharply and oil prices surged, prompting many to anxiously check their balances. Yet markets have since rebounded, validating the principle that they price in possibilities rather than waiting for outcomes.

Fundamentals drive resilience despite oil shock

The rally has been underpinned by strong corporate earnings, particularly in the technology sector, and continued investment in artificial intelligence. The global economy has proven more resilient than many forecasters anticipated, providing a solid foundation for risk assets. The oil price spike, while severe, has not derailed growth as some feared. Central banks have played a supporting role by adopting a patient stance. The Federal Reserve, European Central Bank, Bank of England, Bank of Japan, and Bank of Canada have all held interest rates recently, signalling a balanced assessment of inflation and growth risks. This consistency has helped anchor expectations and buoy investor sentiment.

New Zealand lags as global policy supports risk

The Reserve Bank of New Zealand has followed a similar wait-and-see approach, but the local stock market has not participated in the global rally to the same extent. Analysts attribute this to a softer domestic economic backdrop, which has weighed on New Zealand equities even as international markets surged. Despite the local divergence, the broader global policy environment has been supportive of risk assets. The coordinated central bank restraint has provided a tailwind for equities, reinforcing the case for long-term investors to stay the course.

Short-term fear vs. long-term returns

The recent market dynamics illustrate a classic investing lesson: short-term volatility is often driven by fear and uncertainty about what might happen, while long-term returns are driven by earnings, innovation, and economic growth. When the conflict escalated, worst-case scenarios of oil supply disruptions, sustained inflation, and weaker growth seemed plausible. But unless those outcomes materialise, much of the initial fear tends to unwind. For KiwiSaver investors, the episode underscores the value of patience. Those who resisted the urge to sell during the downturn have been rewarded as markets recovered and reached new highs. The experience reinforces the importance of focusing on fundamentals rather than reacting to headlines.

Outlook: resilience tested but intact

Looking ahead, the key risk remains whether the oil price shock feeds through to broader inflation and forces central banks to tighten policy. So far, major central banks have signalled they are willing to look through supply-driven price increases, but a sustained spike could change that calculus. For now, the global economy and corporate earnings continue to support equity valuations. The wall of worry that markets have climbed may yet grow higher, but the recent rally demonstrates that resilience can prevail even in the face of severe geopolitical and commodity shocks.

The bottom line

• Global equities hit record highs in April despite oil above $120/barrel and Middle East conflict.
• MSCI World Index rose 9.5%, S&P 500 over 10%, Nasdaq over 15% — best month since 2020.
• Central banks held rates, supporting sentiment; New Zealand market lagged due to softer domestic economy.
• Strong corporate earnings and AI investment drove the rally, not just relief from geopolitical fears.
• Long-term investors who stayed invested during the sell-off have been rewarded.
• Key risk: sustained oil spike could force central banks to tighten, undermining the rally.