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There’s nothing like a heaping dose of geopolitics to remind investors of the risks of investing overseas. A drawn-out conflict in the Middle East, however, offers a chance to pick up emerging-market stocks on the dip. 

Emerging markets started the year on a tear. The iShares MSCI Emerging Markets exchange-traded fund gained 16% this year through Feb. 25, the night of President Donald Trump’s State of the Union address. It’s been all downhill since, with the ETF off 12% since then.

The plunge reflects the real risks of a drawn-out war with Iran. A Hormuz bottleneck has taken its toll on global oil supply and snarled supply chains, while the targeting of energy infrastructure last week hampers energy production capacity. India and Pakistan have already begun to limit how much liquified petroleum gas businesses can use, while Sri Lanka declared Wednesdays a public holiday for the foreseeable future to cut down on fuel use. If these challenges persist—or spread to other countries—the global economy could be in for a period of higher inflation and stunted growth.

Net oil importers have been especially hard hit, particularly Asian countries that rely on Middle Eastern oil that travels through the Strait of Hormuz. The iShares MSCI South Africa ETF is off 23% this month; while the iShares MSCI South Korea ETF is down 15%, the VanEck Vietnam ETF 13%, and iShares MSCI India ETF has shed 10.7%. Net energy exporters, such as Saudi Arabia, Colombia, and Brazil, have done a better job of holding on to their gains.

The recent selloff hasn’t dampened the growing interest in emerging economies. A March HSBC survey of 102 institutional investors found that a record 68% of respondents were still bullish on EMs, despite expressing some caution. Alastair Pinder, head emerging markets and global equity strategist at HSBC, recommends leaning into equities in markets that “appear to have been unfairly punished.” South Africa, with its large deposits of coal, platinum, gold, and industrial metals, could benefit from the global energy and critical minerals crunch—and boost the shares of companies like Sasol and Sibanye-Stillwater.

South Korea, home to many companies crucial to AI, could rebound once the war’s effects on markets fade. Andrew Mathewson, portfolio manager at ClearBridge Investments, is still holding shares of Korean semiconductor manufacturer SK Hynix and Samsung Electronics, as well as Taiwan’s TSMC. “Those are areas that we don’t see a particular change in right now, given the situation,” Mathewson said.

Latin America, which was the only region in HSBC’s investor survey with net positive sentiment across all asset classes, is also worth a look as a way to hedge against Asia’s oil shock. While the iShares Latin America 40 ETF has dropped 11% in March, the decline presents an opportunity to get the region’s top stocks at a discount.

Whether a LatAm country is a net oil exporter or importer could make all the difference, according to Goldman Sachs analyst Alberto Ramos. In the past, higher prices have tended to support economic activity in Latin America’s oil exporters, such as Brazil, Colombia, and Argentina. It’s one reason Ramos bumped up his 2026 GDP growth forecast for Brazil a touch. While the iShares MSCI Brazil ETF is off 9.5% this month, it’s still up 10% this year. The Global X MSCI Colombia and Argentina ETFs are down 4.2% and 4.7%, respectively, month to date, but have outperformed the broader emerging markets index.

War has a way of upending even the best-laid investment plans, but the EM story isn’t over. It’s just delayed.

Japan’s $100 Billion Bet

President Trump and Japanese Prime Minister Sanae Takaichi may be the best of frenemies, but deeds are ultimately more important than words.

Thursday’s meeting between the two had a few rough patches, particularly the president’s joke about Pearl Harbor after a reporter asked him why the U.S. hadn’t notified allies about the U.S.’s plan to strike Iran. 

Despite the palpable tension in the room, Japan still offered up billions of dollars in U.S. infrastructure investments. They include up to $33 billion for building natural gas generation facilities in Pennsylvania and Texas, and up to $40 billion for GE Vernova Hitachi Nuclear Energy to build small modular reactors in Tennessee and Alabama. 

These funds are in addition to the roughly $36 billion Japan pledged in February, bringing the country’s total investment in U.S. infrastructure projects to just over $100 billion. It’s unclear whether these funds are grants or loans, but either way, they’re a boon to companies building out the energy infrastructure in the U.S.

The Bottom Line: This is a big deal for GE Vernova, which gained 4.2% last week in a tough market. Its joint venture with Japanese conglomerate Hitachi has an edge in the race to build small nuclear reactors to power everything from data centers to entire neighborhoods. Japan’s influx of funds will help keep the lead.

Stocks Affected: GEV

Gulf States Are Tourism Hotspots. The War Will be Costly.

The Gulf states spent years turning their countries into hot tourist destinations to diversify away from oil—and now the Iran war threatens to curb those efforts. 

The World Travel & Tourism Council estimates that the war in Iran is costing the region’s travel sector at least $600 million a day in spending by international travelers. Per the WTTC, the Middle East accounts for 5% of global international arrivals and 14% of global international air transit traffic. Iranian strikes on U.S. military bases in the region, however, have led to tens of thousands canceled flights across all major hubs, including Dubai, Abu Dhabi, Doha, and Bahrain.

The impact doesn’t stop at the airport. Visits to top Gulf Coast tourist destinations, such as Dubai, have dropped, too, while expats living in the region have fled to their home countries. Major crowd-attracting events have been cancelled as well. Formula 1 recently called off April’s races in Bahrain and Saudi Arabia, two of its most lucrative race contracts, causing that stock to drop 11% so far in March.  

“The ongoing hostilities will curtail tourism, while disruption to flights will undermine business activity and threaten the country’s role as a global transit hub,” wrote Laura James, deputy director at Oxford Analytica, about the United Arab Emirates. 

The Bottom Line: Airline, hotel, and cruise stocks have all taken steep hits in wake of the conflict. Part of that is tied to concerns over higher fuel prices, but companies with significant operations in the region are also facing market scrutiny. The fear is that the Middle East’s tourism industry will see weaker revenue growth even after the war ends.

Stocks Affected: MAR, HLT, H, AC, IHG, LHA, UAL, TKHVY, FWONK.

Indonesia Bans Social Media for Teens. Who’s Next?

Laws banning social media for children haven’t gotten very far in the U.S., but that’s not the case overseas. Indonesia recently became the latest country to pass a law preventing social media use for anyone under 16, months after Australia’s ban earlier this year. More could be on the way, particularly in the Asia-Pacific region, according to Oxford Analytica analysts, which could “threaten Big Tech power.”

That’s a big deal. Asia-Pacific accounts for about 44%, on average, of Meta Platforms’, the parent of Facebook and Instagram largest region, monthly active users from December 2020 through December 2022, the latest data provided by Meta. India, Nigeria, and Bangladesh represented the top three sources of growth in 2022, and all three countries are currently discussing some type of social media ban for children. In fiscal 2025, Asia-Pacific generated about 27% of Meta’s revenue.

Both Meta and Snap warned in their annual report that new bans could lead to fewer application installs, daily average users, or ad engagement. The measures could also open them up to legal penalties for non-compliance.

That hasn’t been the case just yet. In a February earnings call, Snap CEO Evan Spiegel said that global ad revenue from users under 18 was “not material” to results. Meta also noted that regions like Canada and the U.S. were easier to monetize than Asia-Pacific, given the maturity of those online and mobile advertising markets. Until the U.S. picks up the ban baton, don’t expect profits to take much of a hit. 

The Bottom Line: The scope and severity of these bans will vary based on the political systems in place and the strength of any opposition, Oxford Analytica analysts write. Watch key metrics, such as long-term user engagement and acquisition, and revenue growth, for signs that they are having an impact. 

Stocks Affected: META, SNAP, PINS, RBLX

The Traditional Safe Haven Playbook Is Failing Investors

The war in the Middle East should have investors flocking toward tried-and-true havens, U.S. Treasuries, the dollar, and the Japanese Yen among them. Not quite.  

The dollar has gained just 1.3% in 2026, while Treasuries have lost value since the war started—the iShares 20+ Year Treasury Bond exchange-traded fund has dropped 5.5% in March. The Yen continues a year-long slide fueled by Japan’s fiscal instability and concerns over Takaichi’s aggressive spending plans. Even gold, that haven of havens, just had its worst week since 2011.

When it comes to Treasuries, the Trump administration’s approach to foreign policy may be spooking foreign investors. “Trump’s geopolitical and economic policy shocks have forced a radical rethinking of the role of US Treasuries (USTs) as hedges for risk assets worldwide,” writes Davide Oneglia, director of European and global macro at TS Lombard. 

The Bottom Line: Investors are looking for new havens—the Swiss Franc, Singapore’s dollar, and the German 10-year Bund have emerged as popular options—but none can “truly replace” the dollar and Treasuries permanently, Oneglia writes. Even so, they should continue to do well, making dip buying a good way to hedge against this year’s volatility.

Germany: Merz’s Growth Agenda Faces a Pivotal Test at the Polls

• Residents of Germany’s Rhineland-Palatinate state are taking to the polls Sunday in the second of five state elections scheduled for this year. It’s a high-stakes election for Chancellor Friedrich Merz’s federal ruling coalition, composed of his Christian Democratic Union (CDU) and the Social Democratic Party (SPD). 

• Rhineland-Palatinate is a longtime SPD stronghold, but the party is polling neck-and-neck with the CDU. Were the CDU to gain the advantage, it could embolden the party to push through its economic program at the federal level, says Oxford Analytica analyst Niall Walsh. 

• Under Merz, the CDU has aimed to loosen Germany’s fiscal rules to counter Germany’s stagnating growth. Last year, his coalition voted to lift the country’s borrowing limit to spend more on infrastructure, defense, and pro-business reforms.

• Bad results for the SPD, however, may put pressure on the party to emphasize its commitments to social spending, or in other words, “stand up and show it still exists,” Walsh adds. That would increase the risk of policy tensions between the federal coalition members, with discord over fiscal and energy policies likely increasing in the days to come.

Cuba: Will it Be ‘Taken’ By the U. S.?

• President Trump is already eyeing his next regime-change target: Cuba. Earlier this week, the president said he will have the “honor of taking Cuba” now that the regime has been weakened after months of a U.S.-imposed oil embargo that has led to country-wide blackouts, and interruptions to transpo