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The Iran war marked the first major oil shock that did not trigger a broad emerging markets sell-off. Markets repriced countries based on strengths and weaknesses rather than the traditional EM–DM divide.
Financial fundamentals remain the primary drivers of credit risk. Across more than 7,400 companies and 280,000 firm-year observations, profitability (ROA), leverage and size collectively explain the vast majority of variation in credit risk.
Geopolitical resolution is the master assumption. Equity markets are pricing a framework agreement by September, consistent with the prediction market consensus and the pronounced kink in VIX term structure at Q3.