Fitch Ratings has warned that emerging markets could face growing economic challenges during the second half of 2026 due to geopolitical tensions, energy risks, and global policy uncertainty. The rating agency highlighted that renewed disruptions in the Strait of Hormuz have increased concerns over energy security and credit conditions.
The agency said additional shocks from climate events, particularly El Niño, and changes in US tariff policies could further limit policymakers’ ability to protect economic stability. Moreover, these challenges may create pressure on countries already dealing with weaker growth prospects and external vulnerabilities.
Strait of Hormuz Closure Raises Energy Concerns
Fitch noted that the renewed closure of the Strait of Hormuz in July has increased geopolitical risks for emerging markets. The key energy route plays an important role in global oil supplies, making disruptions a major concern for oil-dependent economies.
The agency also stated that the US-Iran conflict contributed to a rise in negative sector outlooks across global emerging markets. As a result, several economies may face additional pressure from higher energy costs and weaker investor confidence.
In its June Global Economic Outlook, Fitch reduced its 2026 growth forecast for emerging markets excluding China by 0.2 percentage points to 3.2 percent. The revision reflected weaker expectations for net oil-importing countries, including India, Poland, South Africa, and Türkiye.
Climate Risks Could Increase Economic Pressure
Fitch also highlighted the potential impact of El Niño on vulnerable emerging economies. The climate pattern could reduce agricultural production, increase inflation, and put additional pressure on external accounts.
Furthermore, governments may face higher costs for food subsidy programs as food prices rise. The agency added that El Niño could also contribute to hydropower shortages in some countries.
These climate-related challenges could make it harder for governments to maintain economic buffers. Therefore, policymakers may need stronger strategies to manage inflation and protect vulnerable sectors.
Trade Policies and AI Market Risks Add Uncertainty
According to Fitch, emerging markets generally have less direct exposure to the artificial intelligence investment cycle compared with developed economies. However, the broader AI investment boom has increased risks in global capital markets.
A possible market correction could reduce investor confidence and affect emerging markets through weaker global risk appetite. Additionally, trade tensions remain another major challenge for exporters.
Fitch said AI-related exports have helped some emerging economies manage the impact of rising US protectionism. However, many countries remain exposed to possible disruptions.
The agency noted that the United States introduced tariffs of at least 10 percent on 60 countries in July. It also highlighted a 25 percent duty on imports from Brazil, warning that such measures could increase supply chain disruptions and reduce exporter margins.
Emerging Market Ratings Remain Resilient Despite Challenges
Despite increasing risks, Fitch said emerging market credit performance has remained stable so far. During the second quarter of 2026, rating upgrades exceeded downgrades by a two-to-one margin.
However, the agency observed a negative change in overall rating outlooks. By the end of the quarter, 13 percent of emerging market outlooks were rated Negative, compared with 8 percent rated Positive.
Fitch linked part of this shift to the economic impact of the US-Iran conflict and continued global uncertainty. The agency warned that geopolitical tensions, climate pressures, and trade challenges could continue influencing emerging market stability throughout 2026.
