If it holds, the US-Iran agreement to re-open the Strait of Hormuz will help to drive a recovery in the Gulf economies and support energy-importing EMs, particularly in Asia. Still, the lasting effects of the energy shock will keep EM GDP growth softer in the near term. Inflation is set to remain above most EM central banks’ targets this year and the bias among central banks will be towards tightening monetary policy. Rate hikes are likely to be concentrated in Asia. Some other EMs such Russia, Brazil and Hungary should still have room to cut.
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