10:00 CET
EM Fundamental Equities: Divergence across oil-driven emerging markets
By Jan de Bruijn, Client Portfolio Manager
The protracted Iran-US-Israel conflict is steadily increasing economic strain, with highly uneven effects across emerging markets. This divergence has been clearly reflected in equity performance: EM equities declined by just over 11% (in EUR) in March, but with pronounced dispersion at the country level.
March was marked by a historic oil price shock, with Brent crude surging from USD 72.5 to USD 118.3 per barrel. Equity market reactions across the Gulf Cooperation Council (GCC) were far from uniform. Saudi Arabia stood out, delivering a strong positive return. The Kingdom benefited from multiple tailwinds: higher oil prices supported Aramco and helped cushion the broader economy; its cross country pipeline to Red Sea export terminals allowed it to bypass the Strait of Hormuz blockade; its economy is less reliant on services; and a large domestic investor base, combined with generally underweight foreign institutional positioning, limited selling pressure.
The UAE, by contrast, fell significantly. Dubai bore the brunt of Iran’s strikes and, given its heavy dependence on tourism, aviation and real estate, experienced immediate and severe economic disruption. The UAE had also been the most favored GCC market among foreign investors, and this overweight positioning amplified capital outflows. Abu Dhabi, while better supported by its hydrocarbon base, was nevertheless constrained by the closure of the Strait of Hormuz, limiting its ability to fully benefit from higher oil prices.
Elsewhere in EM, countries with at least some insulation from higher oil prices – such as Brazil, Malaysia and Mexico – have outperformed. Asia, by contrast, has been the weakest performing EM region, as higher oil prices are structurally negative for Asian equities given the region’s position as the world’s largest net oil importer. China has been a notable exception: while it is the world’s largest crude importer, oil and gas account for a much smaller share of total energy consumption than in peers such as India or Korea. Years of investment in renewables, nuclear power and electric vehicles have reduced China’s effective oil intensity, limiting the inflation and growth impact of higher crude prices. In addition, sizable strategic oil reserves provide months of supply coverage, allowing Beijing to smooth domestic fuel prices and delay the economic effects of supply disruptions.
Consistent with our positioning at the start of 2026, we remain overweight Latin America and Emerging Europe, while maintaining a significant underweight to Emerging Asia and the Middle East.
