Global equity markets delivered modest gains during the third quarter of 2026, despite a challenging backdrop of rising bond yields, higher energy prices and renewed geopolitical tensions.
 

Resilient economic growth and generally strong corporate earnings helped support equities, particularly in the United States. However, performance varied significantly between regions and sectors, with the continued influence of artificial intelligence, changing interest-rate expectations and developments in the Middle East all contributing to market volatility.
 

Global equities remain resilient
 

Global equities finished the quarter higher overall, with the MSCI All Country World Index returning approximately 1.6% in local-currency terms.
 

US equities were among the stronger developed markets. The S&P 500 returned approximately 2.2% during the quarter, while the technology-heavy Nasdaq Composite gained around 2.6%. Both indices reached record levels during the summer as strong corporate earnings and continued investment in artificial intelligence supported investor sentiment.
 

The picture elsewhere was more mixed. The FTSE 100 returned approximately 1.8%, helped by its relatively high exposure to energy and commodity-related companies. Continental European equities struggled as higher bond yields and renewed inflation concerns weighed on sentiment, with the STOXX Europe 600 declining approximately 1.1%.
 

Asian markets were particularly varied. Hong Kong performed strongly, while Japanese equities declined and several semiconductor-heavy Asian markets experienced significant volatility.
 

Artificial intelligence remains a dominant theme
 

Artificial intelligence continued to play an important role in global equity markets during the quarter.

Large technology companies continued to invest heavily in AI infrastructure, including data centres, semiconductors and cloud computing. Strong earnings from several of the world's largest technology businesses helped US equity markets reach new highs during the summer.
 

However, the quarter also demonstrated some of the risks associated with increasingly concentrated markets. Semiconductor shares experienced a sharp sell-off during July as investors questioned the sustainability of AI-related spending, before technology shares subsequently recovered.

This produced considerable divergence within equity markets. While large technology companies generally performed well, smaller companies and more interest-rate-sensitive areas of the market faced greater pressure as borrowing costs increased.
 

Interest rates and bond yields move higher
 

One of the most significant developments during the quarter was the sharp rise in global bond yields.

Persistent inflation, higher energy prices and resilient economic activity caused investors to reassess expectations for interest rates. A number of major central banks adopted a more restrictive stance as policymakers sought to prevent inflationary pressures from becoming entrenched.
 

The resulting increase in government bond yields created a more challenging environment for fixed-income investors and also affected equity valuations, particularly for businesses and sectors that are more sensitive to borrowing costs.
 

The rise in yields was especially pronounced during September, with global bond markets experiencing one of their weakest months for several years.
 

Energy prices rise amid geopolitical tensions
 

Geopolitical developments remained an important influence on financial markets.
 

Renewed tensions between the United States and Iran increased concerns over energy supplies from the Middle East, particularly around shipping through the Strait of Hormuz.
 

Brent crude oil rose sharply during the quarter and moved above $100 per barrel during September. Higher energy prices benefited energy companies but also contributed to renewed concerns about inflation, adding further pressure to global bond markets and interest-rate expectations.
 

Commodities more broadly performed strongly, with the Bloomberg Commodity Index gaining approximately 16% during the quarter.
 

Regional performance diverges
 

The third quarter demonstrated the importance of looking beyond headline global equity returns.

US markets continued to benefit from strong corporate profitability and substantial investment in technology and artificial intelligence.
 

UK equities proved comparatively resilient, supported by their exposure to energy, financial and commodity-related businesses, while European equities faced pressure from rising interest rates and concerns around the region's earnings outlook.
 

Emerging markets produced mixed results. Some markets benefited from improving earnings expectations, while semiconductor-heavy markets experienced significant corrections following their strong performance earlier in the year.
 

China also experienced a more difficult quarter, while Hong Kong equities were notably stronger.
 

Looking ahead
 

As investors enter the final quarter of 2026, the economic backdrop remains finely balanced.

Corporate earnings and resilient economic activity continue to provide support for global equity markets. However, higher interest rates, elevated bond yields, geopolitical uncertainty and increased energy prices remain potential sources of volatility.
 

Artificial intelligence is also likely to remain an important influence on markets. While substantial investment continues across the technology sector, the increasing concentration of some global indices in a relatively small number of companies reinforces the importance of diversification.
 

The third quarter provides another useful reminder that headline index performance does not always reflect what is happening beneath the surface. Different regions, sectors and asset classes can behave very differently as economic conditions change.
 

For long-term investors, maintaining a diversified portfolio and remaining focused on long-term financial objectives can help navigate periods of market uncertainty rather than attempting to predict short-term movements.