With a new Federal Reserve chairman and higher U.S. interest rates on the horizon, some emerging markets are more vulnerable than others to tightening monetary conditions in 2018. One country seen in the cross hairs is Saudi Arabia, already in the throes of broad economic reform.

Although last year was favorable for developing countries, investors remember the painful "taper tantrum" that ensued several years ago, when the Fed signaled it would begin pulling back on its massive bond purchases that kept rates low while injecting liquidity in markets.

Some markets are likely to fare better than others, but observers say countries with currencies linked to the dollar, like Saudi Arabia and other Gulf countries, have a lot riding on the outcome.

So-called "dollar-sphere" markets have monetary policy that is at least partly outsourced to the Fed, and by extension are vulnerable to rate hikes. "These are the countries that must heed the Fed," L. Bryan Carter, head of emerging markets Fixed Income with BNP Paribas Asset Management, said.

Citing upside risks to inflation that may boost the U.S. dollar, Bank of America this week said 3 Fed hikes this year was a real possibility.

"Most central banks across emerging markets have completed rate cutting cycles," said Jim Barrineau, co-head of emerging markets debt at Schroders Investment Management.

"If Fed rate hikes do not result in a stronger dollar — as has been the case so far — then these countries should be relatively unaffected," said Ed Al-Hussainy, senior interest rate and currency analyst at investment firm Columbia Threadneedle.

"If U.S. rates move too quickly, they will dislocate [high yielding] assets more broadly and the most liquid emerging markets will not be immune to a selloff," he added, pointing to the 2013 taper tantrum as an illustration of this idea in action.