The IMF Spring Meetings in Washington, D.C., took place against a more fragile backdrop than many investors had expected only a few months earlier. Last fall’s discussions were dominated by Trump tariffs, fiscal dominance, secular decline of the US dollar and AI-infrastructure spending. By contrast, this year’s meetings were shaped by a new shock: the conflict in Iran and the resulting repricing of energy, shipping and geopolitical risk. The IMF’s latest World Economic Outlook acknowledges a slower and more inflationary global backdrop, but the broader message from policymakers and investors was not one of imminent crisis. Rather, the dominant question was whether stronger macro frameworks, built over the last several years, can withstand a more fragmented world of recurring conflict, tighter supply chains and renewed commodity shocks.
What stood out most in discussions this year was the gap between deteriorating macro fundamentals and relatively resilient market pricing. Asset prices retraced much of the March drawdown this month, suggesting that investors have quickly discounted a prolonged conflict or a more persistent energy shock. That reaction was surprising given the downgrades to growth, upward revisions to inflation expectations and the broader sense that downside risks remain elevated. In many respects, the market has behaved as if the shock were temporary and manageable, while policymakers appear more focused on the possibility that second-round effects have yet to arrive.
Three Key Themes
1. Conflict and Energy Have Replaced Trade as the Dominant Macro Driver
The most obvious shift from last year is that tariffs and trade policy no longer sit at the center of the macro conversation. Instead, energy markets, shipping chokepoints and geopolitical fragmentation have become the key transmission channels into inflation, growth and financial conditions. IMF meetings repeatedly emphasized that the issue is not just crude oil, but also diesel, LNG, fertilizer, insurance and logistics. This broader set of challenges represents a more complicated and potentially more persistent form of shock than the market’s quick retracement would imply. This suggests that inflation may unfold in multiple waves rather than a single surge. Fuel and utility costs show up first, while refined products, food and other downstream effects can take longer to pass through. By the time those secondary effects become visible in the data, some policymakers may have already lost valuable time.
2. Better Frameworks Are Real, but They Are Now Being Stress-Tested
A recurring conclusion across meetings was that many countries are facing this shock with stronger policy frameworks than they had two or three years ago. Central banks generally have more credibility; fiscal debates are more grounded in debt sustainability and IMF-supported programs are more central to country-level discussions. But the tone has shifted from designing frameworks to testing whether they can survive repeated shocks. The question is no longer whether countries can establish credible fiscal rules, adopt inflation targets or negotiate IMF programs. The question is whether those frameworks can hold when energy prices rise, remittances weaken, shipping routes are disrupted and domestic politics make implementation harder. That is the central macro challenge of this cycle.
3. Emerging Markets Remain Resilient, but Differentiation Matters More Than Ever
One reason the market has remained relatively calm is that emerging markets (EM) are not uniformly vulnerable to this shock. Some countries have stronger external balances, higher reserves and better policy credibility. Others are commodity exporters and may actually benefit from improved terms of trade. Latin America stands out in this regard, given its agricultural, metals and energy exposure. By contrast, energy importers with weaker buffers remain exposed, particularly if reserves begin to erode and second-round inflation pressures emerge later in the year. In this environment, broad EM generalizations are less useful than country-specific differentiation based on fundamentals, technicals and policy response.
Regional Perspectives
Latin America
Latin America appears relatively well-positioned in the current environment. The region is rich in agricultural, energy and metals resources, and should benefit from a more fragmented global economy that increasingly values commodity security and supply diversification. That does not mean the region is free from challenges. Mexico, Chile and Colombia all continue to manage supply-driven inflation pressures and political constraints, while central banks remain cautious about easing too quickly. But the broader takeaway from the meetings was that Latin America is more likely to be a beneficiary than a casualty of the current global landscape. The US refocusing on the Western Hemisphere also appears, at minimum, supportive for the region at a time when trade and investment flows are becoming more strategic.
Europe
Europe’s challenge is one of layered shocks. The region is still dealing with the consequences of the Russia-Ukraine war, and now the Iran conflict has added a second energy and geopolitical channel. In EM Europe, discussions focused heavily on fiscal execution, EU fund absorption and the implications of higher energy prices for inflation and growth. Romania remains a story of fiscal credibility and funding execution, while Hungary sits at the intersection of energy vulnerability, policy credibility and EU politics. More broadly, the message from the meetings was that imported inflation and fiscal discipline remain central, even as regional policymakers try to avoid overreacting to a shock that is meaningful but not identical to what was experienced in 2022.
Asia
Asia remains an anchor of global growth, but it is not immune to the new energy regime. China and the US are still the two central pillars of the global outlook, even after the IMF revised global growth lower in its latest projections. At the same time, several Asian economies appear exposed to a prolonged disruption through imported energy, shipping routes and energy reserve drawdown risk. A key point from the meetings was that physical energy availability may matter more than price alone if trade routes stay constrained for longer. Policymakers in Asia generally retain more room for a differentiated response than markets sometimes assume, but the region’s vulnerability to external supply shocks remains significant. This year’s conversation was less about China’s cyclical slowdown and more about how an energy- and security-driven world affects the rebalancing of domestic demand and policy.
Middle East and Africa
The Middle East saw the largest growth downgrades in the IMF’s forecasts, but the region’s outlook is far from uniform. Saudi Arabia continues to look relatively resilient thanks to buffers, route diversification and policy flexibility, even if non-oil activity softens. Kuwait and Iraq do not have the same degree of logistical flexibility and consequently remain more directly exposed to prolonged disruption.
In Africa, many countries remain anchored to IMF programs, fiscal adjustment and external financing, but with a clearer sense that the new energy shock is colliding with already-tight social conditions. South Africa, Nigeria, Ghana and Ethiopia each illustrate a different version of the same problem: stronger frameworks are in place, but those frameworks are now being tested by food, fuel and foreign exchange (FX) pressures at the same time. The tone was generally constructive, but also more realistic about the political difficulty of sustaining reform through another externally driven shock.
In Closing
This year’s IMF Spring Meetings felt less like a routine forecast update and more like a discussion about how interconnected economies function in a world of overlapping shocks. Macro frameworks are stronger than they were in the 2010s, but the risks highlighted by policymakers are real and, in our view, not yet fully reflected in market prices. Investors have largely retraced the March drawdown and appear willing to look through the Iran conflict as a temporary shock.
We think markets remain too complacent about the risk that higher energy prices could persist long enough to weigh more materially on growth and feed into broader inflation. The impact of the first-round shock is already visible; however, the second-round effects are not. Whether policymakers respond early enough—and with sufficient credibility—will matter greatly for relative performance across EM countries. That is why we have rotated away from commodity importers and toward exporters, where stronger terms of trade, better external buffers and greater policy flexibility should provide relative resilience.
EM still offers attractive investment opportunities, but capturing them will require selectivity, not passive index exposure. Countries with strong reserves, credible policy frameworks and favorable external positions should continue to outperform, while those with weaker buffers and heavier import dependence may face a more difficult adjustment. In our view, this is a cycle where active country selection and disciplined positioning will matter far more than passive exposure.