EM Weekly
April 18, 2026

Diplomatic momentum continued to build this week as Iran-U.S. discussions remained broadly constructive and markets increasingly priced a ceasefire extension as the most likely near-term outcome. Adding to the positive tone, Lebanon and Israel agreed to a formal 10-day ceasefire, with the two sides set to hold their first direct talks in Washington in 34 years next Tuesday, facilitated by Secretary of State Marco Rubio. On Friday, reports emerged that the U.S. is considering a $20 billion cash-for-uranium deal with Iran as part of a broader diplomatic package – a potential breakthrough that, if confirmed, would represent the most concrete signal yet of a path toward a durable resolution. Direct U.S.-Iran talks are expected to follow in Islamabad as early as Sunday while Iran announced that the Strait of Hormuz is fully open for the remainder of the ceasefire. The cumulative message from the week’s diplomatic news flow is that the regional de-escalation narrative has real momentum, even as a comprehensive resolution to the broader Iran conflict remains a work in progress.

The path to that conclusion was not a smooth one. The U.S. announcement of a naval counter-blockade of the Strait of Hormuz at the start of the week raised immediate fears about whether the ceasefire would hold under those conditions, sending Brent crude and WTI sharply higher to $103 and $105 per barrel, respectively. As the week progressed and the ceasefire proved more resilient than feared, Brent and crude moderated to the low to high 80s, respectively – meaningful intra-week swings that underscore how sensitive markets remain to headline risk. The S&P 500 advanced more than 3%, extending the recovery that began the prior week. The U.S. dollar softened modestly, with the DXY settling below 98 from 99 a week ago. The U.S. Treasury market rallied with the 2-year yield falling 9bps to ~3.71%, the 10-year tightening 10bps to ~4.24%, and the 30-year declining 8bps to 4.87%. Gold moved up more than 2.0% to around $4,840 per ounce. 

On the domestic data front, March PPI came in well below expectations at +0.5% month-over-month versus consensus of +1.1%, with core PPI a notably soft +0.1% – energy drove goods prices sharply higher but services were flat, suggesting pass-through beyond energy remains contained for now. Weekly jobless claims for the week ending April 11 fell to 207K, below expectations of 213K, with the 4-week moving average at ~210K – a continued signal of a healthy labor market. Large U.S. bank earnings this week collectively reinforced the picture: U.S. consumers are weathering the energy shock well, though management tone across the board reflected a mild softening in the forward macro outlook.

The week’s most consequential macro development came from the IMF’s Spring World Economic Outlook. The Fund cut its 2026 global growth forecast to 3.1% from 3.4% prior to the conflict – with a partial recovery to 3.2% projected for 2027 – and delivered a sharper downgrade for Emerging Markets to 3.9% from 4.2% in January, citing the Middle East conflict, higher energy prices, and tighter financial conditions as the primary culprits. Crucially, the IMF flagged that downside risks have risen materially should disruptions persist – a signal that the Fund’s base case is itself already embedding significant uncertainty. Emerging Asia drew a specific warning: oil-importing economies face increasingly difficult policy trade-offs between supporting growth and containing inflation, with limited fiscal buffers to fall back on.

European macro data presented a mixed though cautionary picture. Euro area March CPI surprised to the upside, driven by energy, complicating what had been an increasingly clear easing path for the ECB despite tentative signs of activity stabilization across the bloc. In the UK, growth beat expectations but sterling weakened as higher energy-driven inflation expectations and volatile gilt yields pushed out the prospect of Bank of England rate cuts. The message from Europe is consistent: the easing cycles that appeared well underway at the start of 2026 have been materially interrupted by the energy shock, and the path back to cutting is likely to be slower and more contested than markets had priced only a few months ago.

In China, the March trade balance deteriorated on soft export growth and strong import growth, signaling possible headwinds to the country’s robust external growth engine. First quarter GDP growth and March industrial production beat estimates while retail sales were softer than expected, underscoring a still lackluster domestic demand picture. 

Hungary’s parliamentary election delivered a decisive pro-EU opposition victory, ending Prime Minister Viktor Orbán’s 16-year grip on power and triggering sharp appreciation in the forint and improved investor confidence in Hungarian policy credibility. The implications extend well beyond Budapest: an opposition-led Hungary would fundamentally alter EU internal dynamics, including its posture toward Russia and Ukraine, representing perhaps the most significant shift in Central European politics in over a decade.

In Latin America, the IMF announced that it will resume dealings with Venezuela while the U.S. lifted sanctions against the country’s central bank. Argentina reached a staff level agreement with the IMF on its latest program review and obtained a $550 million guarantee from the IDB to broaden its multilateral financing envelope.