Oil-market disruption continues, but its effects are far from uniform across emerging economies. Lendable CEO Chris Wehbe shares the firm's market view and insights into its positioning.
Over the past quarter, the Strait of Hormuz crisis has dominated investor attention, with talks between Iran and the US continuing in fits and starts. If June’s truce created a path for the normalisation of the global economy, the tensions that resurfaced in July were a reminder that the oil market remains in deficit and that progress can be quickly undone.
With capital deployed across 22 emerging markets, we are closely watching this dynamic. The conflict has already caused some collateral damage through higher inflation and rates. However, the broader backdrop has remained constructive, with economic data proving more resilient than expected across most geographies.
Further, what has become evident over the past three months is that not all emerging economies are equally exposed. Against this uneven landscape, the case for private credit in emerging markets remains strong, and we believe that a dynamic, data-driven approach is well suited to pursuing risk-adjusted returns for investors.
Economic consequences of a prolonged crisis
Four months into the crisis, the effects are being felt across the global economy. The eurozone price index rose to 3.2% in May, while the US CPI hit 4.2%, its highest in three years. The pressure has been even sharper in oil-importing emerging economies.
This has driven a broad shift toward more hawkish sentiment among many central banks: the ECB and the Bank of Japan have hiked rates, while Fed funds futures have shifted from pricing in cuts to expecting an increase before year-end. The same change in policy direction echoed across much of Asia, where currency pressures and rising import costs have prompted several central banks to tighten policy or abandon plans to cut rates.
Despite that, the direct economic effects of the disruption have been relatively muted, especially given the scale of the supply cut. While in part this is explained by the ongoing AI investment boom, which has helped underpin global demand, the single largest cushion has come from an unprecedented, coordinated release of strategic oil reserves.
In March, the IEA agreed to release 400 million barrels, the largest emergency stock release in its history. Moreover, China’s role, even if less visible, has been crucial in closing the gap. Beijing chose to continue drawing down its reserves, releasing an estimated 3 to 4 million barrels per day from a stockpile exceeding 1 billion barrels, the world’s largest.
The policy mix helped keep most economies afloat, as significant disruption emerged only in some of the most fragile and Gulf-oil-dependent Asian countries, such as Bangladesh and Pakistan.
Are we facing an oil glut, or an oil spike?
After the June truce was agreed, oil prices rapidly subsided, driven more by anticipation of an impending glut than by any substantial normalisation of flows. The consensus assumes that a durable reopening of the Strait will follow within the next few weeks, eventually tipping the oil market into surplus.
The building blocks of that scenario are already visible. OPEC+ output jumped by roughly 3 million barrels per day (bpd) between May and June, to over 36 million bpd, as Gulf producers restarted volumes stranded by the conflict. The UAE, having left OPEC, pumped a record 4.1 million bpd in June, signalling an intent to compete with the bloc on volume rather than price. Non-OPEC supply has remained robust, with US production near 14 million bpd. On the demand side, the EIA projects global oil consumption will decline by around 1.2 million bpd this year, driven largely by demand destruction in non-OECD economies hardest hit by the crisis.
For all of this to lead to a glut, however, the reopening has to hold. That remains our base case, but as credit investors, we need to focus on managing tail risk, and we believe the market may be underpricing the possibility of continued disruption. As we write, the underlying disagreement over the Strait’s management remains unresolved, and Hormuz is bound up with broader geopolitical considerations, including Iran’s nuclear programme, that complicate any resolution.
Meanwhile, the buffers that absorbed the initial shock are wearing thin. The US Strategic Petroleum Reserve has fallen to its lowest level since 1983, while overall OECD state stocks are at less than a month’s cover of demand. China’s strategic reserve remains substantial and can still be drawn on, but the cushion as a whole will become harder to sustain over the coming months.
By our estimates, flows through the Strait need to return to 75%-85% of pre-crisis levels in the medium term to bring the oil market back into balance. Anything short of that risks resetting prices to a durably higher equilibrium.
Impact on emerging market economies
From an economic standpoint, we are starting to see divergence across emerging markets. Although some Asian economies are slowing, emerging markets are still projected to grow this year, though less than before the crisis. The IMF revised its 2026 growth projection down by 0.4 percentage points to 3.8% (still above the global average). Emerging Asia is still posting the fastest growth among developing regions, with India holding roughly steady at 6.4%.
Latin American countries remain largely insulated from the direct effects of the oil shock and have actually seen their 2026 growth revised upward since before the crisis to 2.4%. This divergence shows up clearly in monetary policy too, with oil-producing Latin American countries like Brazil and Mexico cutting rates over the quarter. This is itself a marker of the asset class’s growing maturity, as dispersion creates opportunities for selective, bottom-up allocation, rather than a binary “risk-on, risk-off” view of emerging markets as a whole.
Portfolio positioning: risk management and dynamic allocation to capture global opportunities
The market is betting on a resolution of the crisis, but the situation in the Strait of Hormuz remains uncertain, and the risk of a new escalation is ever-present. If that happens, oil prices might climb back up. For the moment, we are not seeing widespread signs of a slowdown in most economies.
This view is consistent with the picture we see in borrower-level data across our portfolio: we are not experiencing any significant deterioration in asset quality. Our global mandate allows flexibility in our allocation choices. Over recent years, Latin America has remained our most active growth area, and our deal pipeline reflects this conviction. Conversely, our exposure in the most affected Asian economies remains limited.
Despite current uncertainty, we believe the underlying opportunity in emerging-market credit remains intact. Economic projections continue to indicate positive growth across our core markets for this year and the foreseeable future. Taking a position in the real economy of emerging countries gives investors exposure to this growth trend. By remaining dynamic in our asset allocation and selective in our approach, we believe we are well placed to continue to capitalise on these opportunities and deliver positive returns to investors.