Why Emerging Markets Are Dismissing the Bad Iran News

Global stock markets seem disconnected from geopolitical reality. There’s no clear path to a peace deal between Washington and Tehran. The Strait of Hormuz remains closed, pinching energy importers from Pakistan to Thailand. Yet almost two months into the war, the benchmark MSCI Emerging Markets Index has practically recovered all the losses since the US and Israel first struck Iran in late February.

This price reaction is markedly different from 2022, when Russia’s invasion of Ukraine sent oil and gas prices spiking and emerging markets into a tailspin. So what are investors thinking? I offer three explanations.