Falling energy prices won't defuse rising risk of civil unrest in emerging markets

• Iraq saw the sharpest proportional rise in protest activity among emerging markets over the past year, followed by Turkey, while India (already highest-risk) experienced marked increases in demonstrations since Q2 2025.
• Countries with weaker fiscal positions face a dilemma between subsidizing energy costs and slowing fiscal consolidation, with Moody's warning that negative rating risks depend on whether government responses damage fiscal trajectories.
• Verisk Maplecroft flags India, Mexico, Brazil, Argentina, Colombia and Turkey as most at-risk going forward, while bond investors may tolerate only temporary and targeted fiscal measures rather than broad subsidies.

Summary: Emerging Markets Face Rising Civil Unrest Despite Oil Price Decline

Key Findings:

Global civil unrest reached a six-year high in Q2 2026, according to UK-based Verisk Maplecroft. While oil prices have fallen toward $70/barrel for Brent crude following a U.S.-Iran truce that reopened the Strait of Hormuz, analysts warn that months of elevated energy costs have already damaged household finances across emerging markets.

Most Affected Countries:

Iraq experienced the sharpest proportional rise in protest activity among emerging markets over the past year, followed by Turkey. India—already the highest-risk country for protests—saw a marked increase in demonstrations since Q2 2025. Other high-risk nations include Brazil, Mexico, Argentina, Colombia, Iran, and several African countries including Ethiopia, Nigeria, and South Africa.

Market Implications:

Governments face difficult choices: countries with stronger fiscal buffers like Indonesia and the Philippines can absorb shocks through subsidies, while those with weaker positions must choose between passing costs to consumers (risking unrest) or absorbing costs (slowing fiscal consolidation). Moody's indicates negative rating risks depend on whether government responses weaken fiscal trajectories.

Regional Concerns:

Energy import-dependent countries like Lebanon face particular vulnerability. Several nations (Bangladesh, Pakistan, Kenya, Nigeria) showed slight improvements but remain in high-risk territory. The IMF's push to avoid broad subsidies complicates matters for countries like Kenya and Mozambique seeking new IMF programs.

Outlook:

Analysts expect inflationary pressure from shipping disruptions and energy infrastructure damage to persist into H2 2026. Bond investors may tolerate temporary, targeted fiscal measures, but the fragile ceasefire means pressure could rebuild quickly.