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Oil Spikes, Peace Talks Stall; EM Assets Dip
22 Apr
Summary
- Emerging market assets declined due to rising oil prices and stalled Iran peace talks.
- The MSCI emerging markets index fell 0.4%, ending a recent rally.
- Concerns over the Strait of Hormuz closure and ongoing conflict continue.
Revved-up emerging-market assets declined as rising oil prices and stalled Iran peace talks curbed risk appetite. The MSCI index of developing-world equities fell 0.4% as of 12:11 p.m. in London, ending a two-day rally. A concurrent index of emerging-market currencies dropped 0.2% as the Bloomberg Dollar Spot Index advanced, while Brent crude briefly climbed above $100 a barrel.
Diplomatic efforts to resolve the conflict showed little progress, with the Strait of Hormuz remaining shut. The US extended a truce while awaiting a revised peace proposal from Iran. Despite market volatility, emerging assets have held up relatively well, with stocks on track for their strongest start since 2006.
Strategists noted that while oil markets fluctuated, reactions in EMFX and some EM rates markets became more muted. The market anticipates a negotiated de-escalation, though the path is expected to be bumpy. In foreign-exchange markets, China's yuan strengthened, while the Turkish lira remained little changed.
