Falling Oil Prices Won't Defuse Civil Unrest Risk in Emerging Markets

Key Facts

In a development reflecting the fragility of the geopolitical balance, a fragile US-Iran truce has driven oil prices lower, easing immediate inflationary pressures on emerging markets. However, analysts argue that the drop alone will not defuse civil unrest risk, as the damage to household finances has already been done, according to Reuters reports. They point out that eroded purchasing power and higher living costs in many emerging countries remain combustible ingredients.

While lower oil prices have helped stabilize energy costs, other factors such as elevated food prices and unemployment continue to weigh on households. In Turkey, the consumer confidence index edged up to 87.9 in June from 85.8 the prior month, per market data, but remains well below pre-crisis levels. Meanwhile, Canada's annual inflation rate of 3.2% shows that price pressures have not fully abated even in advanced economies, dampening risk appetite for emerging-market assets.