Oil Shock, AI Tailwinds, and Portfolio Shifts Across Emerging Markets>

Why It Matters

Higher oil prices and a compressed rate‑cut window pressure growth and currency stability in many EM economies, reshaping asset allocation and risk management for global investors.

Key Takeaways

• Oil price spikes above $100 pressure oil‑importing EM economies
• AI supply‑chain exposure boosted by TSMC and Chroma ATE gains
• Rate‑cut cycles in EM likely to be shorter, shallower
• Brazil benefits from commodity tailwinds as rate cuts begin
• India's growth outlook remains intact despite near‑term energy shock

Pulse Analysis

The first quarter of 2026 underscored how geopolitical turbulence can quickly overturn emerging‑market fundamentals. The abrupt escalation in the Middle East shut key shipping lanes near the Strait of Hormuz, pushing Brent crude past the $100 mark and straining the balance sheets of oil‑importing nations such as India, Southeast Asia and parts of Central‑Eastern Europe. These economies now face heightened current‑account deficits, currency depreciation pressures, and a more cautious fiscal stance, while oil‑exporting countries in Latin America and the Gulf enjoy a temporary windfall. Central banks, already navigating a post‑pandemic tightening cycle, must now reconcile inflationary spikes from energy costs with the desire to support growth, likely resulting in shorter, shallower rate‑cut paths than earlier projections.

Against this backdrop, the fund’s conviction in artificial‑intelligence‑driven growth remains firm. Semiconductor leaders like Taiwan Semiconductor Manufacturing Company (TSMC) and test‑equipment specialist Chroma ATE have delivered strong earnings, reflecting the deepening demand for AI‑optimized chips and the testing infrastructure that underpins them. The strategy emphasizes a diversified AI exposure—spanning platform innovators, supply‑chain components and infrastructure—allowing the portfolio to capture upside while mitigating company‑specific risk. Recent additions to the AI supply chain were timed to exploit price dislocations, reinforcing a long‑term view that AI will continue to reshape productivity across sectors.

Commodity exposure also reflects a shift from cyclical betting to structural growth. Metals such as copper are positioned as essential inputs for electrification and AI hardware, while gold offers a hedge against broader currency weakness. The fund added Zijin Mining to capture hard‑asset cash flow and leveraged exposure to commodity‑exporting nations like Peru, Chile and South Africa, which stand to benefit from sustained demand. Country‑specific moves—such as increasing Brazil’s weight as rate cuts commence, trimming India’s exposure amid energy volatility, and selectively adding defensive oil assets in the MENA region—illustrate a nuanced, bottom‑up approach. Looking ahead, the fund will continue to prioritize earnings‑resilient, structurally sound names while monitoring the duration of the energy shock, ensuring flexibility in an environment where macro‑policy and geopolitical variables remain fluid.