Emerging Markets Debt Holds Firm Amid Rising Geopolitical Tensions

Emerging markets debt entered 2026 with strong momentum, supported by solid fundamentals, attractive real yields and a weaker U.S. dollar. That strength was interrupted in March when geopolitical shocks, especially the conflict involving Iran, lifted oil prices and pressured EM currencies, rates and spreads.

The impact has been uneven across countries. Oil exporters such as Kazakhstan, Nigeria and Colombia have benefited from higher crude prices, while importers like India, South Africa and South Korea face more inflation pressure and softer growth prospects.

In this environment, country selection matters more than broad market direction. Some markets have also seen policy strain as governments try to cushion energy shocks without worsening fiscal balances.

Even with the volatility, the asset class remains resilient and still offers compelling income potential. For investors willing to take a selective approach, EMD may offer opportunity where fundamentals are strong and valuations remain attractive.