Fitch Ratings warned on July 30 that the renewed closure of the Strait of Hormuz in July signals persistent risks for emerging markets' credit profiles in the second half of 2026.
The ratings agency said additional shocks from El Niño and U.S. tariffs could further test policymakers' ability to protect economic and financial buffers.
How does the Hormuz closure affect emerging markets?
The renewed closure raises geopolitical and energy risks for developing economies already under strain. Fitch said the U.S.-Iran war has pushed up the share of mid-year sector outlooks rated as deteriorating across emerging markets. Oil-importing countries face the sharpest exposure, since higher energy costs squeeze government budgets and inflation.
How much did Fitch cut its emerging markets growth forecast?
Fitch lowered its 2026 growth forecast for emerging markets excluding China by 0.2 percentage points, to 3.2%, in its June Global Economic Outlook. The agency said weaker forecasts for net oil-importing economies drove much of the revision. India, Poland, South Africa and Turkiye were named among the countries most affected.
What risks does El Niño pose to emerging markets?
Fitch flagged El Niño as a separate threat to vulnerable emerging markets this year. The weather pattern could reduce agricultural output, push up inflation and strain external finances across affected countries. It could also raise the cost of food subsidy programs and cause shortages in hydropower generation, the report said.
Could an AI market correction hurt emerging markets?
Emerging market issuers generally carry less direct exposure to the artificial intelligence investment cycle than issuers in developed markets, Fitch said. The agency warned, however, that the AI investment boom has increased capital markets' exposure to a potential correction. Such a correction could weaken global risk appetite, with knock-on effects for emerging markets broadly.
How are US tariffs affecting emerging markets?
AI-related exports have helped some emerging market economies offset the impact of rising U.S. trade protectionism, Fitch said. Even so, many countries remain vulnerable to further trade pressure. The United States imposed duties of at least 10% on 60 countries in July, following a new 25% tariff on imports from Brazil, and Fitch said the measures could add margin and supply-chain pressure for exporters.
What does the USMCA review mean for Mexico?
Fitch also warned that a shift to annual reviews of the United States-Mexico-Canada Agreement could raise uncertainty if the process becomes prolonged. That uncertainty may constrain the recovery of fixed investment in Mexico, the agency said.
Are emerging market credit ratings still resilient?
Despite these pressures, ratings performance among emerging market issuers has stayed resilient this year. Fitch reported that upgrades outnumbered downgrades by two to one in the second quarter of 2026. The balance of rating outlooks worsened even so, with 13% negative at quarter's end compared with 8% positive, partly reflecting fallout from the U.S.-Iran conflict.
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