Iran War Halts Record Start for EM Debt Issuance
A record-breaking start to 2026 for emerging-market debt issuance has come to a sudden stop, a direct casualty of market turmoil and surging borrowing costs stemming from the war in Iran. The freeze, reported on March 27, leaves numerous developing nations in a precarious financial position, facing potential liquidity crises and the risk of credit downgrades as their access to international capital markets is severed.
OECD Slashes UK Growth to 0.5% as War Hits Global Economy
The economic shockwaves are spreading far beyond developing nations, with the Organization for Economic Cooperation and Development (OECD) warning that no major economy will be spared. The United Kingdom is forecast to suffer the most among developed countries, with the OECD slashing its 2026 growth outlook to just 0.5% and raising its inflation forecast to 4%. The revision reflects the U.K.'s high dependence on imported energy, making it acutely vulnerable to price surges caused by conflict-related supply disruptions in the Strait of Hormuz.
Fitch Ratings corroborates the grim outlook, projecting that a prolonged conflict could erase 0.8% from global real GDP compared to its base case. Under this adverse scenario, U.S. growth in 2026 would fall to 1.5% from 2.2%, while the eurozone's growth would drop below 1%. Inflation across major economies would be an estimated 1.3 percentage points higher after four quarters.
Investors Flee US Assets as 'Bad Volatility' Grips Markets
The geopolitical uncertainty is fueling what market analysts describe as "bad volatility"—unpredictable price swings driven by headlines rather than fundamentals. According to Ozan Tarman, vice chair of global macro at Deutsche Bank, this environment is characterized by extreme investor skepticism toward official government statements and a struggle to assess fundamental risks.
There is an extreme level of skepticism towards headlines from the US White House.
— Ozan Tarman, Vice Chair of Global Macro at Deutsche Bank
This is forcing a strategic shift among institutional investors. A clear trend of diversification away from U.S.-denominated assets is emerging as the conflict reinforces expectations of structurally higher energy prices, regardless of the war's duration. Many investors are being forced to liquidate previously winning positions to manage risk in a market where consensus trades are increasingly vulnerable to sharp, unexpected reversals.
