EMBX: Actively Navigating Iran-Driven Risks in EM Debt
March 11, 2026
Read Time 5 MIN
Key Takeaways:
- The team reduced Gulf exposure as Iran-driven risks increased but valuations failed to adjust, creating an unfavorable risk/reward backdrop.
- We favor selective exposure to commodity exporters in Latin America and Sub-Saharan Africa, which appear better positioned across multiple geopolitical scenarios than the Gulf region.
- Emerging markets bonds offer a significant yield cushion during this geopolitical event, with EMBX offering 7.41% YTW while actively adjusting exposures to manage evolving regional risks.
The VanEck Emerging Markets Bond ETF (EMBX) was up 1.20% in February, compared to 1.34% for its benchmark, the 50% J.P. Morgan Government Bond Index - Emerging Markets Global Diversified (GBI-EM) and 50% J.P. Morgan Emerging Markets Bond Index (EMBI) and 1.10% for the Global Agg and 2.74% for Treasuries. Year to date (YTD), EMBX is up 3.42% compared to 2.78% for its benchmark. We reduced Gulf and local currency exposure before Iran events, looking to increase both on weakness. That game plan is more intact in EM local currency than in Gulf bonds which, as we said above, didn’t get cheaper and potentially got riskier. Local currency exposure is at 45%, Carry is 6.49%, yield to worst (YTW) is 7.41%, and duration is 5.17.
Average Annual Total Returns* (%) (In USD)
| Month End As of February 28, 2026 | 1 Mo | 3 Mo | YTD | 1 Yr | 3 Yrs | 5 Yrs | 10 Yrs |
| EMBX (NAV) | 1.20 | 4.90 | 3.43 | 18.86 | 11.41 | 4.89 | 5.74 |
| EMBX (Market Price) | 1.46 | 4.88 | 3.72 | 19.06 | 11.47 | 4.92 | 5.76 |
| 50% GBI-EM/50% EMBI | 1.34 | 3.92 | 2.79 | 16.69 | 10.75 | 2.82 | 4.30 |
Average Annual Total Returns* (%) (In USD)
| Quarter End As of December 31, 2025 | 1 Mo | 3 Mo | YTD | 1 Yr | 3 Yrs | 5 Yrs | 10 Yrs |
| EMBX (NAV) | 1.41 | 3.15 | 19.04 | 19.04 | 10.84 | 3.87 | 5.49 |
| EMBX (Share Price) | 1.12 | 3.03 | 18.91 | 18.91 | 10.80 | 3.85 | 5.48 |
| 50% GBI-EM/50% EMBI | 1.11 | 3.32 | 16.80 | 16.80 | 10.08 | 1.50 | 4.20 |
* Returns less than one year are not annualized.
The performance data quoted represents past performance. Past performance is not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance may be lower or higher than performance data quoted. Please call 800.826.2333 or visit vaneck.com for performance current to the most recent month ended.
Prior to 10/06/2025, the Fund operated as the VanEck Emerging Markets Bond mutual fund; performance shown before that date is that fund’s NAV performance (Class I, unadjusted for today’s ETF expenses).
The "Net Asset Value" (NAV) of a Fund is determined at the close of each business day, and represents the dollar value of one share of the fund; it is calculated by taking the total assets of the fund, subtracting total liabilities, and dividing by the total number of shares outstanding. The NAV is not necessarily the same as the ETF 's intraday trading value. Investors should not expect to buy or sell shares at NAV.
EMBX Total Expense Ratio – 0.76%. Van Eck Associates Corporation (the “Adviser”) will pay all expenses of the Fund, except for the fee payment under the investment management agreement, acquired fund fees and expenses, interest expense, offering costs, trading expenses, taxes and extraordinary expenses. Notwithstanding the foregoing, the Adviser has agreed to pay the offering costs until at least May 1, 2027. “Other Expenses” have been restated to reflect current fees.
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The bulk of the relevant asset prices directly affected by Iran are in the Gulf; that’s what matters and has superior analyzability. Gulf bonds were largely unchanged, yet the risks to the region have clearly risen. What is our portfolio view? We went home on February 27 with underweights in the Gulf (Saudi, UAE, Qatar, Kuwait, in particular), because an event was obviously on the way and we wanted room to accumulate, assuming asset prices cheapened and the likely outcome was benign. On Monday, March 2, when markets opened, we were struck that these asset prices didn’t move. Risks certainly seemed higher to us – on Friday we went home with the market having a base-case of a <1 week conflict and now we have a conflict set for what looks like a minimum of many weeks. Risks higher, prices unchanged, you sell, which we did, and continued Tuesday, March 3. Iran matters mostly to the Gulf (as opposed to other EM regions) and represents to us a reason to be underweight at least in the region.
We see two scenarios, fairly balanced in probabilities – either Iran will be able to project meaningful force in the Gulf, or it will not. A “noisy” but toothless Iran is not the same as an Iran unable to materially affect the Gulf. If Iran is incapable of generating risk to the region, the discount of the region should decline. And, the region is the most analyzable in terms of Iran (due to obvious proximity/materiality) and has the bulk of the assets. The problem with a bullish scenario is that those assets didn’t get cheaper as we noted above. And, despite a “regime change” objective on the part of US/Israel, the regime has not changed and has an explicit strategy of surviving “60-90 days”. That’s pretty specific and fits the game-theory – “I see your four weeks and raise you to 3 months”. Risks must remain high to our eye and 50/50 seems the least bad odds.
EM has many potential winners in both scenarios. Commodities exporters in Latam and Sub-Saharan Africa are serious potential winners in both scenarios. The Gulf is a potential winner only in one scenario. Our primary concern is whether we’ll even get a buying opportunity. We noted that Gulf assets were remarkably stable in the face of proximate risks. Well, EM assets generally weakened…but not that much. And, we were not explicitly waiting for them to cheapen as we were with the Gulf. Latam and SSA were already replacing Russia as Europe’s commodities supplier. In a scenario in which Iran remains a material risk to the region, but is in a prolonged conflict, Latam and SSA are winners, in our view. The only issue is how much of a generic “risk-off” moment we get in this Iran situation (i.e., all risk assets correlated).
Exposure Types and Significant Changes
The changes to our top positions are summarized below. Our largest positions in February were South Africa, Mexico, Poland, Thailand and China:
- We increased our hard currency sovereign exposure in Saudi Arabia. This reflected our views on global duration, which was expected to benefit from the removal of the IEEPA tariffs, as well as a slower growth in the U.S. In terms of our investment process, this improved the technical test score for the country.
- We also increased our local currency exposure in China, Thailand, and the Philippines. China continues to guide the currency stronger in an effort to boost domestic consumption and lower trade surpluses. China also continues to support domestic demand, albeit at a modest pace. In terms of our investment process, this improved the economic and policy test scores for the country. The Philippine local bonds are among the least correlated with EM peers, longer-dated bonds have decent valuations, and there is potential for more policy rate cuts. These factors strengthen policy and technical test scores for the Philippines. Thailand’s exposure in question is local duration, which continues to benefit from very low inflation, while the currency has the high correlation with the Chinese renminbi. These factors improved technical and economic test scores for the country.
- We reduced our local currency exposure in Mexico and Indonesia. Indonesia’s policy mix continues to deteriorate, as the pro-growth agenda seems to the top priority both for the government and for the central bank, weighing on Indonesia’s policy test score. In Mexico, we were concerned by a combination of stretched long positioning and a spike of cartel-related violence, which worsened the technical and policy test scores for the country.
- We also reduced our local currency exposure in Chile and Brazil. Chile’s local bond valuations are not attractive (the lowest valuation bucket), while softer global activity is a headwind for copper prices. These factors worsened Chile’s technical test score. Brazil’s local bonds and FX positioning became very elevated after a massive year-to-date rally, worsening the technical test score for the country.
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Disclosures
This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities, financial instruments or digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, tax advice, or any call to action. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice. Actual future performance of any assets or industries mentioned are unknown. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its other employees.
Duration measures a bond's sensitivity to interest rate changes that reflects the change in a bond's price given a change in yield. This duration measure is appropriate for bonds with embedded options. Carry is the benefit or cost for owning an asset. Yield to worst is a measure of the lowest possible yield that can be received on a bond with an early retirement provision. Averages are market weighted. The yields presented do not represent the performance of the Fund. These statistics do not take into account fees and expenses associated with investments of the Fund.
All indices are unmanaged and include the reinvestment of all dividends, but do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in the Fund. Certain indices may take into account withholding taxes. An index's performance is not illustrative of the Fund's performance. Indices are not securities in which investments can be made.
The Fund's benchmark index (50% GBI-EM/50% EMBI) is a blended index consisting of 50% J.P. Morgan Government Bond Index-Emerging Markets (GBI-EM) Global Diversified and 50% J.P. Morgan Emerging Markets Bond Index (EMBI). The J.P. Morgan GBI-EM Global Diversified tracks local currency bonds issued by Emerging Markets governments. The J.P. Morgan EMBI Global Diversified tracks returns for actively traded external debt instruments in emerging markets, and is also J.P. Morgan's most liquid U.S. dollar emerging markets debt benchmark.
The Bloomberg Global Aggregate Index measures the performance of global investment grade fixed income securities.
The FTSE Treasury Benchmark 10 year measures the return of the 10 year U.S. Treasury.
Information has been obtained from sources believed to be reliable but J.P. Morgan does not warrant its completeness or accuracy. The Index is used with permission. The index may not be copied, used or distributed without J.P. Morgan's written approval. Copyright 2026, J.P. Morgan Chase & Co. All rights reserved.
An investment in the VanEck Emerging Markets Bond ETF may be subject to risks which include, among others, risks related to active management, credit, credit-linked notes, currency management strategies, derivatives, emerging market issuers, ESG investing, foreign currency, foreign securities, hedging, high portfolio turnover, high yield securities, interest rate, market, non-diversified, operational, restricted securities, investing in other funds, sovereign bond, special risk considerations of investing in African, Asian, and Latin American issuers, authorized participant concentration, no guarantee of active trading market, trading issues, fund shares trading, premium/discount and liquidity of fund shares, and cash transactions risks, all of which may adversely affect the Fund. Emerging market issuers and foreign securities may be subject to securities markets, political and economic, investment and repatriation restrictions, different rules and regulations, less publicly available financial information, foreign currency and exchange rates, operational and settlement, and corporate and securities laws risks.
Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.
© Van Eck Securities Corporation, Distributor, a wholly-owned subsidiary of Van Eck Associates Corporation.
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Disclosures
This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities, financial instruments or digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, tax advice, or any call to action. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice. Actual future performance of any assets or industries mentioned are unknown. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its other employees.
Duration measures a bond's sensitivity to interest rate changes that reflects the change in a bond's price given a change in yield. This duration measure is appropriate for bonds with embedded options. Carry is the benefit or cost for owning an asset. Yield to worst is a measure of the lowest possible yield that can be received on a bond with an early retirement provision. Averages are market weighted. The yields presented do not represent the performance of the Fund. These statistics do not take into account fees and expenses associated with investments of the Fund.
All indices are unmanaged and include the reinvestment of all dividends, but do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in the Fund. Certain indices may take into account withholding taxes. An index's performance is not illustrative of the Fund's performance. Indices are not securities in which investments can be made.
The Fund's benchmark index (50% GBI-EM/50% EMBI) is a blended index consisting of 50% J.P. Morgan Government Bond Index-Emerging Markets (GBI-EM) Global Diversified and 50% J.P. Morgan Emerging Markets Bond Index (EMBI). The J.P. Morgan GBI-EM Global Diversified tracks local currency bonds issued by Emerging Markets governments. The J.P. Morgan EMBI Global Diversified tracks returns for actively traded external debt instruments in emerging markets, and is also J.P. Morgan's most liquid U.S. dollar emerging markets debt benchmark.
The Bloomberg Global Aggregate Index measures the performance of global investment grade fixed income securities.
The FTSE Treasury Benchmark 10 year measures the return of the 10 year U.S. Treasury.
Information has been obtained from sources believed to be reliable but J.P. Morgan does not warrant its completeness or accuracy. The Index is used with permission. The index may not be copied, used or distributed without J.P. Morgan's written approval. Copyright 2026, J.P. Morgan Chase & Co. All rights reserved.
An investment in the VanEck Emerging Markets Bond ETF may be subject to risks which include, among others, risks related to active management, credit, credit-linked notes, currency management strategies, derivatives, emerging market issuers, ESG investing, foreign currency, foreign securities, hedging, high portfolio turnover, high yield securities, interest rate, market, non-diversified, operational, restricted securities, investing in other funds, sovereign bond, special risk considerations of investing in African, Asian, and Latin American issuers, authorized participant concentration, no guarantee of active trading market, trading issues, fund shares trading, premium/discount and liquidity of fund shares, and cash transactions risks, all of which may adversely affect the Fund. Emerging market issuers and foreign securities may be subject to securities markets, political and economic, investment and repatriation restrictions, different rules and regulations, less publicly available financial information, foreign currency and exchange rates, operational and settlement, and corporate and securities laws risks.
Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.
© Van Eck Securities Corporation, Distributor, a wholly-owned subsidiary of Van Eck Associates Corporation.