Emerging markets are moving through a more complex backdrop, but the investment case remains supported by a mix of structural change, regional resilience and shifting global capital flows. The Middle East conflict has introduced a clear risk point through oil supply disruption, particularly for Asian economies that rely heavily on imported crude. Even so, the broader picture is not simply one of vulnerability. Energy buffers, changing trade patterns and exposure to technology-led growth are helping to keep the asset class relevant at a time when developed market concentration remains a concern.
Oil remains the most immediate pressure point. The partial reopening of the Strait of Hormuz has eased some near-term concerns, but technical negotiations still matter for the durability of any settlement. China, India and Japan all have meaningful exposure to Middle Eastern energy supplies, although the risk is not evenly distributed. China sources a large share of its oil imports from the region, but its stockpiles provide several months of cover. Japan also benefits from substantial reserves. India appears more exposed because its inventory cushion is thinner, making energy prices and supply security more important to its inflation and current account outlook.
China’s position is also shaped by its role in the global energy transition. Its scale in solar panels, electric vehicles and wind power capacity gives it a strategic advantage as governments reassess energy security and accelerate electrification. This does not remove near-term commodity risk, but it does place China within a structural theme that could become more important if supply shocks continue to influence policy decisions.
Korea and Taiwan remain central to the emerging market growth narrative because of their exposure to semiconductors, memory chips and the wider artificial intelligence capital expenditure cycle. Demand linked to data centres and AI infrastructure continues to support parts of the Asian hardware supply chain. While some stocks have already responded to this theme, valuation gaps with developed market peers leave room for selectivity rather than broad enthusiasm.
Emerging market equities have traded at discounts to developed markets for a prolonged period, particularly when compared with the US. A change in market narrative could narrow that gap if global investors continue to question the dominance of US assets and seek broader diversification. A weaker US dollar would also be supportive, as it can reduce the burden of dollar-denominated debt, improve funding conditions and encourage capital to flow towards markets offering differentiated growth prospects.
Fidelity Emerging Markets Limited (LON:FEML) is an investment trust that aims to achieve long-term capital growth from an actively managed portfolio made up primarily of securities and financial instruments providing exposure to emerging markets companies, both listed and unlisted.
