Emerging markets: Resilience and divergence in the face of the latest oil shock

Emerging markets have shown greater resilience to external shocks than in past cycles, and the current Middle East oil shock is another test of that strength. The impact will likely differ sharply across countries, with oil importers generally more exposed and exporters potentially better positioned.

What matters now is each country’s starting point, including reserves, fiscal room, reform progress, energy intensity, and policy credibility. Transmission can also spread beyond fuel costs through shipping, fertilizers, tourism, and currency moves.

Policy choices will be critical because they can cushion growth or protect public finances at the expense of inflation and activity. For investors, this argues for a selective approach rather than a broad EM view.