Buyers have poured cash into rising markets lately because the seek for huge inventory beneficial properties 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 extent of threat in rising markets in terms of beneficial properties being depending on a choose variety of shares, many tied to the AI increase.
The iShares MSCI Rising Markets ETF (EEM) has had sturdy efficiency over the previous few years and into 2026, up 29% in 2025 and nonetheless holding onto a small achieve this 12 months. Nonetheless, its holdings stay largely tilted towards Asia, with massive 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.
“In the event you 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 group at ETF firm International X mentioned on CNBC’s “ETF Edge” earlier this week. “That provides you numerous 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 battle within the Center East resulted in issues about vitality provides to Asia, the place prime shares within the reminiscence sector fueling the AI increase 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) continues to be down near 13% this week.
Among the monumental volatility in South Korean shares is tied to how properly they’ve carried out not too long ago, and what number of retail buyers have seen huge beneficial properties 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.
An enormous spike in oil costs for the reason that outbreak of the army battle has rattled international markets. On Friday, Brent crude futures topped $90 and U.S. West Texas Intermediate crude futures have been closing in on that vary, up greater than 30% this week, whereas Brent has superior practically 26%.
The vitality squeeze in Asian nations could be seen in China’s reported choice this week to inform home oil refining corporations to cease any exports of gasoline, and extra Asian nations could observe with comparable strikes to retain vitality stockpiles, vitality market specialists have mentioned.
It is not time to desert rising markets, in keeping with ETF investing strategists, and a few macroeconomic elements could maintain outperformance in these markets over the longer-term. However Dorson mentioned a “barbell strategy” to funding technique could also be smart, balancing publicity between various kinds of rising markets reasonably than counting on one area. He says considering this manner ought to lead buyers who wish to keep worldwide publicity to have a look at Latin America as a steadiness in opposition to Asian markets.
“I feel it’s good to have each,” Dorson mentioned.
Nations 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 ought 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 might function further tailwinds for economies. “All eyes are on political change that might drive fiscal reform,” he mentioned, and he added which will profit monetary providers sector shares throughout the area.
Equities in a number of Latin America markets additionally commerce at important 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, at present 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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