Emerging Markets Spotlight – April 2026

Key Points

• The conflict involving Iran, the US, Israel is a broad-based energy supply shock, hitting crude, fuels, LNG, fertilisers, petrochemicals, and key inputs, with the potential for global repercussions across emerging and developed economies.
• Energy-importing emerging markets could face higher import bills and weaker external balances and currencies, while shortages and FX weakness may curb growth. Inflation could spill from energy into food, hitting Asia and poorer economies hardest. Impacted economies include Taiwan, Thailand, Turkey, and Poland. China may prove resilient, insulated by weak demand, decarbonisation, ample stockpiles, and supply flexibility, while GCC states could benefit from higher prices but face other war-related risks.
• Potential opportunities exist in non-GCC energy producers, particularly in Latin America (Brazil, Mexico), with selective overweights elsewhere (e.g. South Africa, UAE).

The New Energy Shock Reshapes Emerging Markets

The multilateral conflict centred on Iran represents an exceptional negative supply shock to global commodity markets, with significant potential implications for EM and developed economies. Risks are not only for crude oil, but also for refined products, LNG, fertilisers, petrochemicals, and specialist products such as mining explosives, sulphuric acid and helium.

The transmission channel of the commodity shock into emerging economies includes energy‑importing economies facing the possibility of sharply higher import bills, placing pressure on current account balances and exchange rates. Inflation could rise everywhere, initially via energy prices and later through food prices, driven by fuel and fertiliser costs. Currency weakness in energy importers may further amplify inflation, while outright shortages could constrain activity. These effects are expected to be most acute in EM Asia and, as in 2022, in the world’s poorest nations.

The shock creates a clear split within emerging markets. We see a four‑part taxonomy. Energy importers are the primary losers, facing a combination of weaker growth and rising macro stress. Energy exporters, by contrast, benefit from improved terms of trade and stronger fiscal and external positions. China is significantly insulated by recent policy choices, while GCC markets are beneficiaries of higher hydrocarbon revenues but face war damage and export constraints.

Energy importers may bear the most impact, with several large economies highly exposed. Countries such as India and South Korea run some of the largest oil deficits globally, consuming roughly 5.6mbpd and 2.5mbpd respectively while producing very little. Taiwan and Thailand are similarly exposed relative to the sizes of their economies. Beyond Asia, Turkey and Poland face meaningful headwinds, with oil deficits close to 1mbpd and 0.7mbpd respectively. We have been cautious on these markets and have moved more underweight this month.
 
Despite being a major oil importer, China is relatively resilient: domestic demand is weak; its electricity system and, to a lesser degree, its transport system, are heavily decarbonised; crude stockpiles are large (estimated at 1.2–1.4bn barrels); and imports from Russia (and even potentially Iran) provide supply flexibility. Significantly, Chinese bond yields have fallen since the start of the war and we have become more positive on the outlook for Chinese equities relative to other Asian markets.

Within EM, the key opportunity lies with non‑GCC energy producers. Latin America stands out: Brazil produces around 4.5mbpd versus consumption of 3.3mbpd, while Mexico, Colombia and Argentina are also net exporters. We have been highly positive on Brazil and Mexico and keep our overweight positions. South Africa is a net importer but partially cushioned by its status as a major coal producer and limited coal‑to‑liquids capacity (~150kbpd), reducing the GDP impact to around 0.5%; we have retained our small overweight position.

In the GCC, Saudi Arabia and UAE continue to export reduced volumes via pipelines at much higher prices but have seen a significant number of attacks from Iran. We have reduced our overweight position in UAE to recognise the economic risks from the continuing conflict.

With very high volatility and actual supply constraints in many critical commodities, the outlook for large parts of the global economy and global financial markets is uncertain. However, it is important to recognise the great opportunities in those emerging markets that are exporting at higher prices, and also in China, where farsighted policy choices may lead to strong relative outcomes.

Sources: EIA, 2025 Energy Institute Statistical Review of World Energy, Bloomberg, CGEP.

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