Global Market | US-Israel-Iran conflict has put emerging-markets revival to test

The ongoing conflict in Iran has adversely impacted emerging markets, a sector previously favored by Wall Street investors. The MSCI equity index experienced its largest weekly decline in six years, accompanied by a surge in bond yields. Despite these setbacks, prominent asset managers from firms like Pacific Investment Management Co and T Rowe Price remain optimistic about the long-term potential of emerging markets. They cite reasons such as the need for diversification from U.S. assets and favorable economic growth as key drivers that could sustain interest in these markets once geopolitical tensions ease. In the past week, investors added $12.6 billion to emerging-market equities and bonds, indicating a willingness to capitalize on lower prices. However, the increasing price of Brent crude, now over $90 per barrel, raises concerns about economic growth in oil-importing nations. Additionally, a stronger U.S. dollar has created tighter financial conditions, complicating the investment landscape for emerging markets. JPMorgan Chase has adjusted its recommendations, moving to a more cautious stance on emerging-market assets amid the uncertainty. Investors are currently waiting for clearer signals before making significant portfolio changes, although the fundamental outlook for many emerging markets remains positive in the long run.