The Emerging Markets Weekly: Extra time

Research evidence excerpt

The Emerging Markets Weekly: Extra time

FICC Research

EM Strategy

10 July 2026

Weekly Markets View

Extra time

The re-escalation of hostilities in the Middle East has injected

some volatility into markets, but geopolitics appears far from

being the only focus for investors. The Fed, fiscal challenges, Andreas Kolbe +44 (0) 20 3134 3134

prospective bond supply, and the AI and commodity cycles andreas.kolbe@barclays.com

create a diverse set of drivers for EM assets. Barclays, UK

Marek Raczko

+44 (0) 20 3134 0089

EM Credit: Solid aggregates, some struggles in IG marek.raczko@barclays.com

• EM credit has had a solid H1, despite the ongoing geopolitical gyrations and uncertainties Barclays, UK

which have brought divergences between oil exporters and importers back into focus.

Gabriel Casillas

• EM IG sovereigns have meaningfully underperformed HY, as well as US IG credit YTD, facing a + 1 212 526 7814

gabriel.casillas@barclays.com

more challenging environment from volatility in core rates, fiscal pressures and bond supply. BCI, US

EM Local & FX: Near-term risks vs broader trends

• We find that EM FX reaction to the oil shock this week has been overexaggerated. Hence, there

is some limited scope for EM FX appreciation once oil pricing settles. Meanwhile, the front-end

rates reaction has been quite muted.

• Overall, EM ToT has been significantly affected by commodity prices' adjustments since the

end of April. Clearly, energy prices made the largest impact on the ToT.

EM Economics: The oil is not enough

• Markets are looking past the oil shock. Oil volatility rose after the Middle East escalation, but

prices remain well below levels associated with severe disruption.

• Central banks are becoming more cautious. Inflation shocks have been smaller than in 2022,