Emerging-market debt sales, which began the year at a record pace, have largely stalled due to concerns over the Iran war, according to bankers and investors. This disruption has created market volatility and increased borrowing costs, placing several nations in a precarious financial position. Until recently, many emerging economies experienced strong demand for their debt, defying tariffs and broader geopolitical uncertainty. However, the near-freeze in debt issuance highlights the vulnerability of these economies to escalating global tensions. A notable exception this month was oil-producing Angola, which benefited from the surge in crude oil prices.
According to Stefan Weiler, JPMorgan’s head of CEEMEA debt capital markets, emerging nations, including Saudi Arabia, Mexico, and Turkey, issued debt at such a rapid pace in January and February that first-quarter sales reached a record high, despite the slowdown in March. Sovereign and corporate borrowers in central and eastern Europe, the Middle East, and Africa (CEEMEA) raised an unprecedented $117.5 billion, surpassing the first three months of 2025 by nearly $3 billion, even before Angola’s recent market entry.
However, the increased unpredictability of the conflict, marked by attacks on Gulf countries’ energy infrastructure and the potential closure of the Strait of Hormuz, has made investors cautious. Investors withdrew $3.3 billion from emerging-market debt in the week leading up to March 19 and over $5 billion from high-yield corporate bonds, according to Bank of America. Credit spreads for countries like Egypt and Turkey have widened due to the potential impact of the war on their economies, and they are also highly susceptible to rising energy and food costs.
While some anticipate a potential rebound if the conflict de-escalates, the uncertainty may drive borrowers towards alternative fundraising methods, such as private placements. Despite the turmoil, investors are showing interest in highly-rated Gulf sovereign debt in secondary markets, suggesting a potential demand recovery if the conflict subsides. Some view the widened spreads as an attractive entry point, signalling continued interest in emerging-market debt despite the current challenges.
