EM Corporate Weekly Monitor: Middle East re-escalation rings different for now

Research evidence excerpt

EM Corporate Weekly Monitor: Middle East re-escalation rings different for now

Alisa Meyers AC Global Credit Research

(1-212) 834-9151 24 July 2026 J P M O R G A N

alisa.meyers@jpmorgan.com

Market Strategy

EM corporate performance remained resilient amidst continued Middle East

tensions/rising oil prices, AI/tech related developments and newly announced US

tariffs which altogether dampened market sentiment. While CEMBI BD total return

was negative as UST curve bear flattened (+9bp to +16bp), CEMBI spreads were -4bp

tighter WTD to 159bp with spread returns of +0.2%. CEMBI HY (STW -9bp to 288bp)

outperformed IG (-2bp to 95bp), thanks to HY oil, with CEMBI Ghana (-80bp to

530bp), Argentina (-17bp to 278bp), and Nigeria (-13bp to 207bp) leading even as the

overall oil & gas sector compressed a more modest -4bp to 169bp. Relative to other

asset classes, EM corporates performed better than EM sovereigns (+1bp to 202bp), US

IG (+2bp to 93bp) and US HY (+6bp to 313bp) WTD.

We think CEMBI spreads can maintain the improved stability and keep a Neutral

stance, preferring the BBB to BB space sprinkled with OWs in single names with

catalysts or robust fundamental dynamics. While we made a number of upgrades to

CEMBI HY oil segments in the aftermath of the initial Middle East escalation in 1Q26

(here and here), we have since taken profits, moving Neutral (here) and are reluctant to

reopen OWs at this stage, preferring to stay closer to home. This is considering

compressed spread valuations, higher rates risks, lowered oil price forecasts, as well as

as typical end of summer illiquidity. Anecdotally, our mid-year outlook meetings

suggested that investors have rotated their portfolios somewhat lower beta and we

believe are unlikely to add, unless or until valuations improve.