The episode examines the Iran conflict through an emerging markets lens, analyzing recent developments and exploring two primary scenarios that could unfold in the coming weeks. The first scenario envisions rapid de-escalation that would allow oil prices to retreat toward $80 per barrel, providing relief to EM economies and supporting risk assets. The second scenario contemplates further escalation, potentially including boots-on-the-ground military intervention, which would keep oil prices elevated for an extended period. This sustained pressure would create headwinds for EM growth, inflation dynamics, and external balances. We assess the implications of each path for emerging market currencies.
Participants:
- Luis Estrada(Desk Strategy), LATAM FX Strategist
- Daria Parkhomenko (Desk Strategy), FX Strategist
- Abbas Keshvani (Desk Strategy), Asia Macro Strategist
* Research Analyst opinions are their published views, independent of those expressed by Desk Analysts