Oil Emerges As Best Performing Asset In Volatile March, Rallies 60% So Far

Oil has emerged as the best-performing asset in March 2026, a month that has been extremely volatile across equities, government bonds, and even traditional safe havens like gold. The rally came amid the ongoing US-Israeli war against Iran, which has raised serious concerns over global energy supply.

The international benchmark Brent crude has jumped over 60 per cent in the month so far to quote around USD 116 per barrel, up from USD 72.48 prior to the start of the US–Israel–Iran war, on track to log its biggest-ever monthly gain. The US oil benchmark, West Texas Intermediate (WTI) crude, also surged as much as 52 per cent to USD 102 a barrel from USD 67 on February 27.

The rally in oil prices intensified after Iran effectively choked supply through the Strait of Hormuz, an important sea route that handles about one-fifth of global oil and gas supply.

Gold, which is typically seen as a hedge against inflation and uncertainty, has failed to provide safety this time. Physical gold prices have declined over 8 per cent to Rs 1,46,217 per 10 grams, since the start of the conflict, according to the India Bullion Jewellers Association (IBJA). In the domestic derivatives market, gold futures have declined over 10 per cent to Rs 1,48,433 per 10 grams, as of 4:00 PM, March 30. This is the yellow metal’s worst monthly performance since 2008 and among its sharpest declines in the past five decades.

Gold has historically performed well during periods of geopolitical tension and economic uncertainty. However, this time it bucked the trend. The US dollar took its place as a safe haven instead.

The dollar was also one of the key beneficiaries of the crisis in West Asia, as investors shifted towards safer and more liquid assets. As the world’s primary reserve currency, the dollar typically sees strong demand when risks escalate. Moreover, higher oil prices also raised concerns over inflation, which further strengthened demand for the dollar. At the same time, investors anticipate that higher inflation could prompt the US Federal Reserve to keep interest rates elevated for longer.

The US Federal Reserve, at its March 17-18 meeting, had left the interest rates unchanged at 3.50-3.75 per cent as widely expected, and maintained a hawkish tone in its commentary.

Higher interest rates in the US make assets such as government bonds more attractive, drawing in global investors. As funds flow into these assets, investors need to buy dollars, which increases demand for the currency and supports its strength.

A stronger US dollar makes gold more expensive for holders of other currencies, which tends to weigh on demand and prices. It also reduces the appeal of gold as investors shift towards higher-yielding dollar-denominated assets.

Equity markets have also come under pressure. The BSE Sensex and the NSE Nifty 50, the two widely tracked domestic equity benchmarks, also declined around 11.50 per cent each since the start of the Iran war. In the US, the Dow Jones Industrial Average, Nasdaq, and S&P 500 fell nearly 7-8 per cent during the same time frame. Major Asian indices also underperformed. Japan’s Nikkei 225 fell more than 11 per cent, Kospi more than 9 per cent, Hong Kong’s Hang Seng and China’s CSI 300 up to 5 per cent.

Debt markets have also seen some pressure during the month. The yield on India’s 10-year government bond has inched higher. When yields rise, bond prices fall. This is because, as market interest rates rise, newly issued bonds offer better returns, making older bonds with lower fixed coupons less attractive. To compensate, their prices fall so that their effective return matches current market rates.