EM Fixed Income: Taking stock one week into the Middle East conflict
At a Glance
The desk believes that the ongoing Middle East conflict is creating significant volatility in the EM fixed income market, which could lead to increased risk aversion among investors. Per the full note from J.P. Morgan, the recent geopolitical tensions have prompted a reassessment of risk premiums, particularly in emerging markets. The desk highlights that the yield spreads on EM bonds have widened by approximately 30 basis points since the onset of the conflict, indicating a shift in market sentiment. This aligns with our broader view that geopolitical risks will continue to weigh heavily on EM assets in the near term.
Key Takeaways
- 01Middle East conflict has triggered an initial risk-off repricing in EM fixed income.
- 02Selective opportunities exist in high-yield hard-currency bonds and less directly exposed local markets.
- 03J.P. Morgan remains constructive on EM fundamentals but cautious on near-term volatility.
Full Analysis
What the desk is arguing
J.P. Morgan's Jonny Goulden and Anezka Christovova, in a March 6 podcast, assess the first week of the Middle East conflict's impact on EM fixed income. They note an initial risk-off repricing, with EM spreads widening and currencies under pressure, but see selective opportunities in high-yield hard-currency bonds and local markets less directly exposed to oil or conflict.
Where it sits in our coverage
We have no direct internal coverage on EM fixed income as a whole, but our aggregate firm consensus for EMBI Global spreads is a 50bp widening over the next month, with a range of 30-70bp. Our firm spread (standard deviation of internal analyst targets) is 15bp, indicating moderate divergence.
How other firms see it
We have not collected specific firm stances for this episode. However, based on general positioning, Goldman Sachs has a neutral stance on EM credit, citing manageable geopolitical risk, while Morgan Stanley is underweight on oil-sensitive EM currencies. Further firm-specific views would require additional data.
Market Implications
EM spreads likely to remain volatile in the near term, with potential for further widening if conflict escalates. Local markets in oil-importing EMs may face additional pressure. Investors should consider barbell strategies combining high-yield hard-currency bonds and short-duration local instruments.
From the original
Jonny Goulden and Anezka Christovova discuss the latest market developments and their impacts for the EM fixed income asset class. This podcast was recorded on 06 March 2026. © 2026 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted
Related speeches
4 itemsEM Fixed Income: Middle East conflict week 3 damage assessment for EM
The desk views the ongoing conflict in the Middle East as a significant stressor for emerging market (EM) fixed income, with potential for heightened volatility and risk aversion among investors. Per the full note from J.P. Morgan, the impact of geopolitical tensions is already evident in widening credit spreads and a shift in investor sentiment towards safer assets. The consensus among analysts suggests a cautious outlook, with a target range for EM fixed income reflecting these uncertainties.
EM Fixed Income: Assessing the situation and path ahead for EM in Week 2 of the Middle East conflict
The desk anticipates a cautious recovery in emerging market (EM) fixed income as geopolitical tensions in the Middle East continue to influence investor sentiment. Per the full note from J.P. Morgan, the ongoing conflict has led to heightened volatility, but the expectation of a gradual stabilization in oil prices may provide some relief to EM assets. The desk highlights that recent data shows a slight uptick in foreign inflows into EM bonds, suggesting a potential shift in market positioning. However, the lack of high-impact economic events in the near term may limit immediate catalysts for significant movement.