Emerging economies' record debt spree slumps into a freeze as Iran war rocks markets

• CEEMEA (Central and Eastern Europe, Middle East, and Africa) borrowers raised a record $117.5 billion in Q1 2026 despite March's freeze, with most issuance concentrated in January-February led by Saudi Arabia, Mexico, and Turkey.
• Investors pulled $3.3 billion from emerging-market debt and over $5 billion from high-yield corporate bonds in the week to March 19, while credit spreads widened significantly for Egypt (44 bps) and Turkey (36 bps) but narrowed for Angola (39 bps).
• Bankers report continued funding discussions in 'cautious wait-and-see mode,' with potential shift toward private placements and direct lending if market uncertainty persists, though strong secondary market demand for highly rated Gulf sovereign debt signals potential rebound if conflict stabilizes.

Summary: Emerging Market Debt Issuance Frozen Amid Iran War Turmoil

Key Developments:

Emerging market debt sales have largely halted in March following the outbreak of U.S.-Israeli conflict with Iran on February 28, 2026, ending what had been a record-breaking start to the year. Despite the freeze, first-quarter issuance from Central and Eastern Europe, Middle East, and Africa (CEEMEA) reached an unprecedented $117.5 billion—nearly $3 billion above Q1 2025 levels—driven by strong January-February activity.

Main Players:

• Leading issuers (Jan-Feb): Saudi Arabia, Mexico, Turkey
• Outlier performer: Angola, benefiting from oil price spikes, saw credit spreads narrow 39 bps to 504 bps
• Vulnerable economies: Egypt and Turkey face widening spreads (44 bps and 36 bps respectively) due to exposure to rising energy and food costs
• Other issuers: Helios Towers (Africa-focused corporate)

Market Impact:

The JPMorgan EMBI spread widened 17 basis points to 268 bps since late February. Investors withdrew $3.3 billion from emerging-market debt and over $5 billion from high-yield corporate bonds in the week to March 19—the largest outflow since April 2025 tariff shock. Several banks reduced overweight positions on emerging markets.

Outlook:

Bankers report funding discussions continue in "cautious wait-and-see mode," with access available for strong issuers "at a premium." Secondary markets show resilience, particularly for highly-rated Gulf sovereign debt, suggesting potential demand rebound if conflict subsides. Persistent uncertainty may drive borrowers toward private placements and direct lender transactions. The closure of the Strait of Hormuz and attacks on Gulf energy infrastructure contribute to investor caution.