20 Mar 2026
In March, tragic and concerning developments in the Middle East have added complexity to the narrative around emerging market (EM) equities. Conflict in the region has increased market volatility, prompted some de-risking across the EM complex and pushed oil prices higher, potentially affecting inflation. Here, we consider the potential impact of recent events on the broader EM asset class, individual markets, commodities, and the US dollar. It is important to note that events in Iran and the Middle East are developing rapidly, and our views are subject to change as events evolve.
Authors Nick Price & Chris Tennant 12/03/2026
The MSCI Emerging Market Index and our Emerging Markets strategies both have relatively low weightings to Gulf countries.
If the conflict is prolonged and oil shipping through the Strait of Hormuz is disrupted for an extended period, oil prices could rise meaningfully, weighing on risk sentiment and adding to inflationary pressures globally.
Despite near-term uncertainties, the outlook for EM remains supported by structural trends including ongoing AI-related capital expenditure, which is benefiting technology firms in Asia.
The developments in the Middle East are tragic and deeply concerning, with significant human as well as geopolitical implications. We are continuing to monitor events closely, assessing both macro conditions and company-specific impacts.
While heightened geopolitical risk can trigger sharp market moves and periods of profit taking, such volatility can also create opportunities to add to high-quality EM companies that have disproportionately derated. Our focus remains firmly on fundamentals and valuations, and on using short-term volatility constructively where appropriate.
The events in the Middle East have both direct and indirect implications for Emerging Market (EM) equities. In terms of direct impact, while the MSCI Emerging Market Index includes constituents from countries in the Gulf region, their weighting is relatively small, at <6% of the index (Saudi Arabia, United Arab Emirates, Kuwait, Qatar). The indirect impact is likely to be greater, via oil price volatility. Higher energy prices could exert upward pressure on inflation worldwide, affecting the interest-rate outlook in key regions and, potentially, eroding sentiment towards risk assets.
After an initially muted response, partly reflecting expectations that spare oil capacity could absorb potential supply disruptions, market moves intensified a few days after the strikes on Iran. We saw a broad sell-off across Asian equities as investors took profits in year-to-date outperformers. Precious metals miners also pulled back, while oil prices rose reflecting disruptions to shipping lanes through the Strait of Hormuz (as at 9 March 2026).
In our view, these moves appear largely rational. As sentiment has turned more cautious, investors have reduced exposure to recent winners such as Korea, Taiwan and gold miners. At the same time, the rise in oil prices reflects the significant share of global supply that passes through the Strait of Hormuz. Around a quarter of seabourne oil passes through this narrow channel on its way to end markets.
The key consideration remains the duration of the conflict. In the case of a short-lived conflict and a normalisation in the oil price, history suggests the impact on global risk assets, including EM equities, could be limited. However, in the case of more prolonged tensions, any significant disruption to the Strait of Hormuz could drive up oil prices over the longer term, driving risk-off sentiment and adding to inflationary pressures globally. The impact of heightened inflationary pressures would likely be felt most acutely in EM countries with lower per capita incomes, where energy represents a larger share of household expenditure.
It is worth bearing in mind that Iran has previously indicated intentions to close the Strait, prompting Saudi Arabia to invest in an east-west pipeline, which reportedly has capacity to transport around 5 million barrels of oil per day and bypass the chokepoint. It is also worth noting that global oil demand growth has slowed in recent years, driven by weaker demand from China and the shift towards electrification. Nonetheless, uncertainty remains high, and outcomes are wide ranging.
While the conflict in Iran is likely to drive continued share price volatility in countries forming the Gulf Cooperation Council (GCC) - Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain and Oman - the extent and duration of market volatility could be shorter than what EM investors tend to experience elsewhere. Both the United Arab Emirates and Saudi Arabia have established a track record of supporting equity markets by buying futures and/or individual shares at times of selling pressure. Additionally, investors have applied a geopolitical discount to these equity markets ever since they have been open to foreign investors, reflecting the broader security dynamics of the Middle East region. To the extent that recent developments could ease regional tensions over the long term, or shift the balance of risks, some of this valuation discount could diminish over time – although clearly, the outcome here remains highly uncertain.
Asia warrants particular attention, as stock markets in the region led initial drawdowns after the outbreak of the conflict. The correction has largely reflected de-risking, with the strongest year-to-date performers - including the technology-heavy Korean and Taiwanese markets - seeing the sharpest pullbacks. Asian countries could also be adversely affected by higher oil prices, given many are oil importers. Given that Korea had risen by almost 60 percent in the year-to-date prior to the move, the pullback might even be viewed as a healthy reset. Indeed, we continue to see selective opportunities in Korea, particularly in the technology sector. We believe it is unlikely that the conflict will have a meaningfully adverse impact on technology hardware companies and we would need to see a very large move in oil prices for the economics of data centres to be affected.
India may be more exposed in the event of prolonged disruption to oil supplies. While structurally attractive over the long term, Indian equities remain expensive and are vulnerable to higher oil prices as the country is a significant net importer of oil.
The gold price has remained relatively stable, although there has been modest pullback. However, gold miners have sold off more sharply as investors have taken profits in strong year-to-date performers. The outlook for gold remains strong, in our view.
Fundamentals already looked positive before the start of the conflict, but increased geopolitical risk strengthens the outlook for ‘safe haven’ metals such as gold. Metals and miners can also move directionally with oil and could benefit in the event of another spike in prices, although this is not something we have seen so far.
The outlook for the US dollar is less clear. Higher oil prices could lift US inflation and increase the likelihood of higher interest rates, supporting the currency, while a ‘flight to safety’ could also drive dollar strength. That said, EM economies typically carry less dollar-denominated debt today than in previous cycles, meaning EM performance could be less dependent on sustained dollar weakness than in the past.
Uncertainty around the trajectory and duration of the conflict remains high. We are beginning to see expectations for medium-term (6-12 month) oil prices increasing - reflecting concern around the duration of the conflict and the impact of a drawdown in inventories due to near-term outages - but longer-term pricing expectations have remained relatively stable, suggesting the market is not yet pricing in long-term disruption to energy supplies. Prolonged tensions would have more meaningful implications for commodities and equities.
Despite near-term uncertainties, we believe EM remains supported by structural trends. The majority of AI-related capital expenditure continues to be deployed in Asia, which should remain supportive of Korean and Taiwanese hardware and memory companies, and is a dynamic that should persist regardless of geopolitical turbulence. The electrification theme and associated copper demand also remain intact. At the same time, China continues to move up the manufacturing value chain, with companies becoming increasingly competitive on cost and technology, creating relative advantages within the EM complex.
Nick Price
Nick Price joined Fidelity in January 1998 as a research analyst. In 2005, he led the development of Fidelity’s EMEA group. Supported by a growing emerging markets team of analysts and portfolio managers, Nick was appointed to manage Fidelity’s global emerging markets equity products in July 2009. Nick holds a Bachelor of Commerce and Diploma in Accounting from the University of Natal and is a Member of the South African Institute of Chartered Accountants and a CFA Charterholder.
Chris Tennant
Chris Tennant joined Fidelity in January 2011 as an equity analyst, covering European transportation. In 2012, he rotated onto the London-based Emerging Markets team to cover EMEA and Latin America metals & mining stocks. In January 2015, Chris was handpicked by EM Equity Team Leader Nick Price to undertake a newly created EM shorting analyst role. Since then, he has worked closely with Nick in identifying opportunities for the short book of the FAST Emerging Markets strategy, before being was appointed as Assistant Portfolio Manager in July 2019. Chris holds a master’s degree in Engineering from Imperial College London.
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