Emerging Markets Gain as U.S. De-escalates Middle East Conflict Concerns
Emerging markets experienced a rally as tensions eased over possible U.S. involvement in the Iran-Israel conflict. The MSCI index of EM equities rose, driven by Asian markets. Stock markets in Hungary, Turkey, and others saw gains. The Turkish lira weakened as the central bank maintained rates.
Calm returned to most emerging markets on Friday, allaying fears of immediate U.S. escalation in the Iran-Israel conflict. The MSCI index of emerging market equities climbed 1.1%, bolstered by bullish trends in major Asian markets such as South Korea's Kospi, which exceeded 3,000 points for the first time in over three years.
Markets in Hungary, Turkey, Hong Kong, and India recorded gains between 0.8% and 1.3%, catalyzed by U.S. President Donald Trump's deferred decision on Middle East involvement. The ongoing Israel-Iran skirmish had driven up demand for the dollar and crude oil recently, pushing down emerging market currencies, particularly those in nations importing crude like India and Turkey. A slide in crude prices by 2.2% helped the rupee strengthen after a recent dip.
The Turkish lira fell to 39.7 per dollar, reaching a three-month low even as the central bank held interest rates at 46%. Commerzbank's Tatha Ghose indicated that subtle shifts in the bank's communications signal potential rate cuts. Political unrest gripped Thailand as Prime Minister Paetongtarn Shinawatra's coalition faced turbulence, weakening the baht for the fifth straight session.
(With inputs from agencies.)
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