Hedge funds rethink emerging market bets after US-Israel strikes on Iran
Financial Times
March 2, 2026
AI-Generated Deep Dive Summary
Hedge funds are reevaluating their investments in emerging markets following the US-Israel strikes on Iran, as geopolitical tensions have sent shockwaves through global financial markets. Emerging market stocks and currencies are facing increased pressure, while the US dollar has strengthened, making EM assets less attractive to risk-averse investors. This shift underscores a broader trend of hedge funds reassessing their exposure to regions perceived as higher risk amid heightened uncertainty.
The strikes on Iran have sparked concerns about escalating tensions in the Middle East, which could disrupt global energy supplies and further destabilize emerging markets. Investors are growing more cautious, with many opting for safer assets like US Treasuries and the dollar. This risk-off sentiment is particularly evident in Turkey and Argentina, where currencies have been under pressure due to existing economic challenges and external shocks.
Emerging markets' vulnerability to geopolitical events highlights the interconnectedness of global financial systems. While some hedge funds are scaling back their EM positions, others are seeking opportunities in more stable regions or sectors. However, the immediate outlook for emerging markets remains uncertain, with potential spillover effects on global trade and growth.
For businesses and investors, understanding these dynamics is crucial. The situation underscores how geopolitical developments can rapidly alter market sentiment and drive strategic shifts in investment strategies. As hedge funds rethink their approaches, companies operating in or investing in emerging markets must remain vigilant to navigate this evolving landscape effectively.
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Originally published on Financial Times on 3/2/2026