Finance
Emerging market equity funds slide as iran conflict sparks selloff
Published by Global Banking & Finance Review®
Posted on March 6, 2026
2 min readLast updated: March 6, 2026
Quick Summary
Emerging market equity funds have slumped sharply in March amid rising geopolitical tensions in Iran, leading to among the weakest performances across asset classes, alongside cooling inflows and a broader emerging-markets index decline.
Emerging Market Equity Funds Decline Sharply as Iran Conflict Drives Selloff
Impact of Iran Conflict on Emerging Market Equity Funds
March 6 (Reuters) - Emerging market equity funds have posted steep declines this month as investors cut exposure to risk assets amid the escalating Iran conflict, making them among the worst performers across asset classes.
Biggest Decliners Among Emerging Market Equity Funds
Based on LSEG Lipper calculations, equity funds focused on Pakistan, Chile, Greece, Colombia, Argentina, the United Arab Emirates and Saudi Arabia were among the biggest decliners over the past month, across the 518 categories tracked by Lipper.
Comparison with Previous Gains
The pullback follows strong gains in emerging markets earlier this year, driven by relatively cheaper valuations, solid growth prospects and a weakening U.S. dollar.
Performance of Key Indices
MSCI’s emerging markets equities index has fallen more than 6% this week, compared with a 2.2% decline in the MSCI World Index and a 0.7% drop in MSCI United States.
Investor Flows and Market Sentiment
Weekly flows data tracking about 13,000 emerging market equity funds showed inflows slowing to $5.8 billion this week, the lowest level in seven weeks.
Analyst Outlook and Risks
Goldman Sachs said that if the disruption proves short-lived, the broader earnings impact may remain limited given the relatively resilient sector mix, and maintained its forecast for 25% growth in MSCI EM earnings per share in 2026.
"However, higher starting valuations following strong gains last year leave EM equity markets vulnerable to near-term correction risks,” the brokerage said.
(Reporting By Patturaja Murugaboopathy in Bengaluru. Editing by Jane Merriman)
Key Takeaways
- •Emerging market equity funds focused on Pakistan, Chile, Greece, Colombia, Argentina, UAE and Saudi Arabia ranked among worst performers globally this month based on LSEG Lipper data.
- •MSCI’s emerging markets equities index dropped over 6% this week, well underperforming MSCI World (–2.2%) and MSCI USA (–0.7%) indices.
- •Weekly inflows into emerging‑market equity funds slowed to $5.8 billion—the lowest in seven weeks—a reflection of heightened risk aversion amid the Iran conflict.
Frequently Asked Questions about Emerging market equity funds slide as Iran conflict sparks selloff
1Why are emerging market equity funds declining?
Emerging market equity funds are declining as investors cut risk exposure due to the escalating Iran conflict, causing a broad selloff.
2Which countries' equity funds saw the biggest declines?
Funds focused on Pakistan, Chile, Greece, Colombia, Argentina, the United Arab Emirates, and Saudi Arabia were among the biggest decliners.
3How much did the MSCI emerging markets index drop?
The MSCI emerging markets equities index fell over 6% this week, significantly more than the global and US indices.
4What do analysts expect if the conflict disruption is short-lived?
Analysts like Goldman Sachs believe that if the disruption is short-lived, earnings impact may be limited and expect 25% EM EPS growth in 2026.
5How have investor inflows to emerging market equity funds changed?
Weekly inflows slowed to $5.8 billion, the lowest level in seven weeks, as investors became more cautious.