Political instability is one of the biggest risks an investor faces when delving into markets beyond the developed world. Most emerging-market nations have young democracies and long histories of violent political transition. In these nations ‘politically stable’ is often a euphemism for ‘authoritarian.’

The democratic fervor sweeping across North Africa has reminded investors of the region’s political volatility. At the time of writing, widespread protests have forced Tunisian President Zine al-Abidine Ben Ali to flee the country. Massive and prolonged demonstrations also threaten the long reign of Egyptian President Hosni Mubarak.

It’s easy to get swept up in the narrative of an ostensibly democratic revolution fueled in part by new media technologies. But the events in North Africa are problematic for investors.

The region’s formerly vaunted political stability fostered markets that have attracted a sizable amount of foreign direct investment, though the pace of that investment has slowed in recent months. Tunisia hosts a large contingent of Fidelity’s North Africa staff, including 80 Fidelity International employees and 380 workers at a human resources software company that the investment firm owns.

A number of North Africa-focused mutual funds and exchange-traded funds have sold off sharply amid the unrest. Most broader emerging-market funds also have exposure to Egypt and have consequently experienced volatility amid the political turmoil.

Crude oil prices have risen sharply, touching $100 per barrel, over concerns that the Suez Canal could be closed if Mubarak is forced to step down. A shut down of this vital waterway seems unlikely; Egypt’s leadership, whomever that may be, will need the revenue generated by the canal to run the country.

However, all bets are off if an Islamist government rises to power in Egypt. Such an outcome would represent a decisive shift in the balance of power in the region, threatening both Israel and the flow of Middle Eastern crude to the Western world. These fears underpin the rise in oil prices.

All of this belies a significant challenge facing emerging-market investors, many of whom have been lulled into a sense of complacency after years of relative quiet. Political risk is a potent issue that can crop up at unexpected times, even in countries that have been viewed as bastions of stability.

Few seemed shocked by the events in Tunisia. But analysts were taken aback by the popular uprising in Egypt, despite a charged political climate that has existed for years. And this revolutionary fervor could spread to other authoritarian countries, particularly if the protestors in Egypt succeed in ousting Mubarak. No one should take the turmoil as a sign to unload their emerging-market investments. But investors should gird themselves for volatility in the coming months.