May 27, 2026
Emerging Markets Rebound Despite Energy Risks
Strong Emerging Market Rally Masks Energy Concerns
Emerging market equities fell 13% in the first month after the war with Iran began but recovered all of that—and more—in the following weeks. At the time of writing, emerging equities are up 22.6% year-to-date (USD, 8 May 2026). It would be tempting to conclude that emerging markets have become significantly less vulnerable to energy shocks given the strong rally in emerging market equities. This would be a premature conclusion.
These stellar returns were driven by technology stocks, in line with renewed interest in the global AI theme. Investors in one of Asia’s more energy-sensitive economies, South Korea, quickly looked through the energy worries and raced ahead, driving the Korean market up 92% YTD, led by memory giants Hynix and Samsung.
Looking beyond the emerging market headlines, the potential pain from higher energy prices is already showing up in markets with less technology exposure, through more muted equity performance, government interventions (subsidies and quotas) and concerns about weaker growth and higher inflation. India, Indonesia and Thailand fall into this bucket (all underweight positions in the emerging market fund). Even in Latin America—where a net oil exporter like Brazil might be expected to benefit from higher oil prices—the overall market has barely recovered its wartime losses.
The risk to emerging market consumers, fiscal accounts and monetary policy remains elevated if the Strait of Hormuz remains closed through the summer and higher energy prices persist. We continue to monitor tightness in global energy markets closely and pay particular attention to second- and third-round spillovers into the most vulnerable emerging economies.
About the Author
Matthew Strauss has more than 25 years of global investment experience. Mr. Strauss joined CI in 2011 to help manage currency overlays and oversee the emerging market equity mandates. He is currently the lead manager on CI Global Select Equity fund and co-manager of the CI Global Income and Growth mandate. He also serves on the Asset Allocation Committee. As lead portfolio manager for the global and emerging market equity mandates, Matthew provides macroeconomic, country and sector strategies for these mandates. He has extensive international experience, having worked as Chief Strategist at the largest retail bank in Africa and as Senior Fixed Income and Currency Strategist at RBC Capital Markets. Matthew holds the Chartered Financial Analyst designation, a Bachelor of Commerce degree and an MA in Economics from the University of Stellenbosch, South Africa.
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