Buyers have poured cash into rising markets in recent times because the seek for massive inventory positive factors has migrated abroad and as they search for diversification past the concentrated S&P 500. However the U.S.-Iran army battle has reframed the focus query, highlighting the stage of threat in rising markets relating to positive factors being depending on a choose variety of shares, many tied to the AI growth.
The iShares MSCI Rising Markets ETF (EEM) has had robust efficiency over the previous few years and into 2026, up 29% in 2025 and nonetheless holding onto a small achieve this 12 months. Nevertheless, its holdings stay largely tilted towards Asia, with giant publicity to China, South Korea, India, and Taiwan, collectively representing over three-quarters of the index weight, and lots of the prime shares tied to tech, together with Taiwan Semiconductor and Samsung.
“For those who take a look at the index inside rising markets, it is nonetheless roughly 80% Asia,” Malcolm Dorson, senior rising markets portfolio supervisor and senior v.p. head of the lively funding crew at ETF firm World X mentioned on CNBC’s “ETF Edge” earlier this week. “That provides you lots of focus threat,” he mentioned.
General, the EM index has a 30%-plus tech sector weighting.
South Korean shares have skilled excessive volatility this week. The market posted its worst single-day transfer ever on Wednesday because the escalating warfare within the Center East resulted in issues about vitality provides to Asia, the place prime shares within the reminiscence sector fueling the AI growth depend on energy-intensive processes. After its worst day ever, the South Korean index rebounded on Thursday for its finest day since 2008. The iShares MSCI South Korea ETF (EWY) remains to be down near 13% this week.
Among the monumental volatility in South Korean shares is tied to how properly they’ve carried out just lately, and what number of retail traders have seen massive positive factors from holding them. SK Hynix, a prime holding within the broad rising market indexes, gained 274% final 12 months, whereas Samsung gained 125%.
Efficiency of the iShares MSCI South Korea ETF over the previous one-year interval.
A big spike in oil costs because the outbreak of the army battle has rattled world markets. On Friday, Brent crude futures topped $90 and U.S. West Texas Intermediate crude futures had been closing in on that vary, up greater than 30% this week, whereas Brent has superior almost 26%.
The vitality squeeze in Asian nations might be seen in China’s reported choice this week to inform home oil refining corporations to cease any exports of gas, and extra Asian nations could observe with related strikes to retain vitality stockpiles, vitality market consultants have mentioned.
It is not time to desert rising markets, in keeping with ETF investing strategists, and a few macroeconomic components could maintain outperformance in these markets over the longer-term. However Dorson mentioned a “barbell method” to funding technique could also be smart, balancing publicity between several types of rising markets reasonably than counting on one area. He says considering this fashion ought to lead traders who need to keep worldwide publicity to take a look at Latin America as a steadiness in opposition to Asian markets.
“I feel it’s essential to have each,” Dorson mentioned.
International locations like Argentina, Brazil, and Colombia are closely linked to vitality and commodities market, and he mentioned rising oil costs can present a further tailwind for these economies. “I would say 25 to 33% of the story needs to be that attractiveness of getting publicity to commodities,” he mentioned. He added that there are additionally political reform efforts in Latin American nations that would function extra tailwinds for economies. “All eyes are on political change that would drive fiscal reform,” he mentioned, and he added which will profit monetary companies sector shares throughout the area.
Equities in a number of Latin America markets additionally commerce at vital reductions to U.S. shares, with many price-to-earnings ratios roughly half these within the S&P 500. For instance, Vanguard’s S&P 500 ETF, VOO, presently trades at a P/E ratio of 28, whereas its rising markets ETF, VWO, trades at a P/E ratio of 18.
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