At Any Rate EM Fixed Income: Taking stock one week into the Middle East conflict
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Mar 6, 2026 Anezka Christovova, Head of EMEA EM and LATAM Local Market Strategy at J.P. Morgan, offers regional FX, rates and local-market expertise. They review one-week EM moves and whether the Middle East conflict has altered the outlook. Discussion covers EMFX positioning squeezes, central bank rate responses and which catalysts like the Strait of Hormuz and oil to watch next.
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Muted EM Credit Response Despite FX And Rates Moves
- EM markets have shown a muted credit reaction while EM FX and local rates moved in line with developed markets, leaving EM local bond returns slightly positive year-to-date.
- Jonny Goulden notes EM currencies ~2% weaker, rates ~17bp higher, and spreads only ~3–4bp wider, so risk premia barely changed.
Conflict Raises Tail Risk And Reframes Scenarios
- The Middle East conflict is a major shock that raises uncertainty and forces rethinking of scenarios, potentially moving toward worst-case regional escalation.
- Jonny highlights Iran's attacks, wider regional strikes, and threats to shut the Straits of Hormuz as game changers.
Trim EM Risk And Move To Neutral
- Reduce top-down EM risk exposure and move toward neutral positions while uncertainty resolves.
- Jonny says JP Morgan halved their risk cuts early in the week and moved to flat/neutral across EM as prices started to incorporate new risks.