Buyers have poured cash into rising markets in recent times because the seek for huge inventory features has migrated abroad and as they search for diversification past the concentrated S&P 500. However the U.S.-Iran navy battle has reframed the focus query, highlighting the stage of threat in rising markets in relation to features being depending on a choose variety of shares, many tied to the AI growth.
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 acquire 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 have 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 energetic funding workforce at ETF firm World X mentioned on CNBC’s “ETF Edge” earlier this week. “That offers you quite a lot 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 struggle 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 greatest day since 2008. The iShares MSCI South Korea ETF (EWY) continues to be down near 13% this week.
A number of the monumental volatility in South Korean shares is tied to how nicely they’ve carried out not too long ago, and what number of retail buyers have seen huge features 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 navy battle has rattled world 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 might be seen in China’s reported resolution this week to inform home oil refining firms to cease any exports of gas, and extra Asian nations might observe with comparable strikes to retain vitality stockpiles, vitality market consultants have mentioned.
It is not time to desert rising markets, based on ETF investing strategists, and a few macroeconomic elements might maintain outperformance in these markets over the longer-term. However Dorson mentioned a “barbell strategy” to funding technique could also be clever, balancing publicity between several types of rising markets somewhat than counting on one area. He says pondering this manner ought to lead buyers who wish to preserve worldwide publicity to take a look at Latin America as a steadiness towards Asian markets.
“I feel it’s essential 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 might say 25 to 33% of the story must 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 further tailwinds for economies. “All eyes are on political change that would drive fiscal reform,” he mentioned, and he added that will profit monetary companies 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 the moment 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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