EM outlook: shifting sands
Conflict in the Middle East clouds the near-term EM outlook, while US tariff policy and a busy electoral calendar also introduce large uncertainties. But EMs should benefit from the striking down of IEEPA, while the breakneck artificial intelligence rollout suggests external demand should remain robust.
Duração: 1 Min
Date: 18/03/2026
Key Takeaways
Incentives to draw the US-Israel-Iran conflict to a close within weeks rather than months remain, but a more protracted conflict could shock the global economy via energy prices, putting pressure on EMs via risk-off dynamics.
- Prior to the Iranian conflict, investor sentiment towards EMs had turned increasingly positive as EM fundamentals improved. Most recently, the striking down of IEEPA has opened the door to lower tariffs.
- The accelerating global AI capex cycle is a structural tailwind for global trade and high-tech Asian manufacturing. Large Sovereign Wealth Funds (SWFs), abundant energy, and access to the US technology stack suggest that Gulf states could rapidly roll out data centres after the conflict ends.
A busy electoral calendar will keep politics and fiscal prudence (or lack thereof) front and centre this year.Latin America has the largest number of elections this year and is most likely to garner US attention given the hemispheric importance within the “Donroe Doctrine”.
Pressure from the Trump administration to boost military spending will add to the risks of fiscal slippage, while Gulf states are also likely to increase defence spending on missile shields and military capabilities following on from the Iran conflict.
