US-Iran ceasefire boosts emerging market ETFs, favoring Latin America over India.

A tentative ceasefire between the US and Iran has sparked renewed investor interest in emerging market (EM) ETFs, reversing a four-week outflow trend with over $1.1 billion flowing into these funds. The MSCI Emerging Markets Index rose 7.4% for the week, its best since 2020. However, the inflows are concentrated in commodity-linked regions like Latin America, especially Brazil, which benefits from higher oil prices and easing monetary policy expectations. Conversely, India saw significant outflows, reflecting profit-taking and a tactical shift rather than a fundamental downturn. Investors currently prefer EM markets insulated from geopolitical risks and linked to commodities over traditional growth markets. The outlook remains cautious due to potential risks from ceasefire breakdowns, rising oil prices, and Federal Reserve policy changes that could impact EM performance.