Emerging markets hit record highs as AI boom and oil exports offset war risks

Simon Mugo Sun, May 3, 2026 at 3:30 AM EDT 2 min read **

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Investing.com --** Emerging-market equities are currently outperforming expectations of a conflict-driven downturn, with the MSCI Emerging Markets Index rebounding to all-time highs.

Despite initial fears that rising energy costs and geopolitical instability in the Middle East would derail international stocks, the index has gained approximately 14% this year, according to a report from the Wall Street Journal.

The emerging markets index’s performance significantly outpaced the S&P 500’s 5.6% rise during the same period.

AI demand shields Asian tech hubs

The primary engine behind this year’s surge has been the massive build-out of artificial intelligence infrastructure. Key suppliers based in South Korea and Taiwan have seen their valuations soar as they provide essential hardware for global tech firms.

South Korea’s Kospi benchmark has climbed 57% in 2026, while Taiwan’s Taiex is up 34%. Industry heavyweights like Samsung and Taiwan Semiconductor Manufacturing Co. (TSMC) have recorded double-digit gains, with Samsung alone posting an 84% climb so far this year.

The tech gains have helped those specific markets offset the impact of higher energy prices. Particularly notable are nations like South Korea, which imports roughly 70% of its crude oil from the Middle East.

Analysts indicate that while emerging markets are often volatile, their relatively cheap stocks and potential for growth continue to attract investors seeking alternatives to U.S. shares.

Brazil and exporters withstand energy shocks

Outside of Asia, investors are increasingly favoring oil-exporting nations that maintain a low dependence on Middle Eastern energy supplies. Brazil has emerged as a standout performer, with its Bovespa index adding 16% this year.

After becoming a net oil exporter in 2017, Brazil is projected to reach a production capacity of 4.76 million barrels of crude a day by 2030, representing the fastest production growth on the continent.

This insulation from energy shocks has allowed Brazil’s materials and financial sectors to return substantial cash to investors via dividends. Consequently, the iShares MSCI Brazil ETF has nearly quadrupled in size over the last year to approximately $12 billion.

Even with the recent run-up, emerging-market stocks remain fundamentally cheaper than their U.S. counterparts; the MSCI EM ETF trades at roughly 18.4 times earnings, compared to 28.9 times for the S&P 500.

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