Emerging markets stabilize after Trump declares Iran deal ‘over’

Emerging-market assets came under pressure on Wednesday after President Donald Trump declared the interim Iran deal "over," sending oil prices surging roughly 5% and rattling global risk sentiment. Hard-currency sovereign bonds in oil-importing nations bore the brunt of the selling, though markets staged a partial recovery on Thursday as investors weighed whether the renewed U.S.-Iran hostilities would escalate further.

Oil Spike Triggers Broad Selloff

Trump made the remarks during the NATO summit in Ankara, Turkey, telling reporters the memorandum of understanding signed with Iran on June 18 was "just a waste of time." He added that the United States may reimpose its naval blockade of the Strait of Hormuz and revisit plans to seize Kharg Island, Iran's primary crude export terminal.finance.yahoo+1

Brent crude futures settled up 5.2% on Wednesday at $78.02 per barrel, according to Reuters ↗ 2.27%, extending gains from a 3% jump the previous session after Iran attacked three commercial vessels near the Strait of Hormuz and the U.S. revoked a waiver on Iranian oil sanctions. The S&P 500 declined 0.28%, while the Dow Jones Industrial Average fell 1.1%. The Nasdaq Composite managed a marginal gain, lifted by chip stocks.wsj+2

Oil Importers Hit Hardest

International bonds issued by oil-importing emerging markets suffered the steepest declines. Kenya, Sri Lanka, and Egypt — nations whose fiscal positions are acutely sensitive to energy costs — saw their dollar-denominated bonds fall roughly one cent on the dollar on Wednesday. The MSCI ↗ 0.87% emerging-market currency index moved only modestly, reflecting contained contagion beyond the most vulnerable credits.english.kontan

"The problem now is… when a new peace deal is announced, they aren't really going to give it full credit because they don't think it's going to last," said Michael Field, chief equity strategist at Morningstar ↗ 3.00%. "Equally when war starts up again, people aren't going to take this as seriously either because they think a peace deal will probably be announced in the next few days."english.kontan

Partial Recovery on Thursday

Markets stabilized on Thursday as oil prices retreated from two-week highs despite Iran's retaliatory strikes on U.S. military sites in Kuwait and Bahrain. AI-related stocks rebounded, pushing South Korea's Kospi up 0.6%, while Chinese equities posted their largest one-day gain in three months as chip shares regained ground after reports that Beijing would allow top AI firms to purchase Nvidia ↗ 8.74% H200 chips. Bonds in Sri Lanka and Kenya edged back up, and Gulf region credits stabilized.fortune+2