Emerging stocks reclaim pre-war peak on Hormuz deal hopes, AI expectations

Emerging-market currencies and equities climbed Monday even as the stalemate between the US and Iran on resuming peace negotiations left the Strait of Hormuz almost impassable and pushed oil higher.

MSCI’s emerging equity index rose 1.2%, eclipsing the previous peak reached in February just before the war. The gauge’s advance was driven by outperformance in Asian semiconductor stocks including Taiwan Semiconductor Manufacturing and SK Hynix. This week’s raft of US tech earnings are expected to point to robust demand for artificial-intelligence (AI) chips.

Read/listen:
Taiwan market cap tops $4trn on AI boom, overtaking UK
$600bn AI splurge could keep US growth humming

South African markets were closed on Monday, due to the Freedom Day public holiday.

A sister currency gauge added 0.3% to approach a one-week high, led by gains in the Malaysian ringgit, Hungarian forint and Thai baht.

Traders have seized on an Axios report that Tehran would accept reopening the Strait of Hormuz in exchange for the US lifting its blockade of Iranian ports, though optimism faded during the US session, sending Brent crude above $108 a barrel.

The Mexican peso, seen as a bellwether of risk appetite, traded lower against the US dollar. The South African rand was marginally firmer in evening trade.

ADVERTISEMENT

CONTINUE READING BELOW

“The correlation between Iran headlines and EMFX remains rather weak,” said Alvaro Vivanco, a strategist at Wells Fargo in New York. “Positioning is modest given the high uncertainty and volatility, sometimes on random headlines. Only a proper resolution of the conflict is likely to open the next leg of the rally.”

Crude fuelling inflation

Vivanco is bullish on a basket of currencies from Brazil, Chile, Argentina, Peru and South Africa, partly as central banks will remain cautious on the expectation of second round effects of higher crude on inflation.

Emerging-market stocks, meanwhile, have posted a stunning recovery this month after a 10% slide in March. The MSCI index is up about 16% this year, three times the gains in the S&P 500, while rapid profit-estimate upgrades for emerging-market companies point to more gains ahead.

“I’m positioned for a continuing rally and benefited from the jump over the last month, but getting worried by the fast rising expectations especially in tech,” said Xin-Yao Ng, a fund manager at Aberdeen.

MSCI’s currency index too is less than 1% off from regaining its pre-war high, having climbed about 2.3% this month.

Nicolas Jullien, global head of fixed income at Candriam, said he’d turned bullish on emerging currencies on the bet the dollar is resuming its weakening trend.

“Emerging market assets have shown notable resilience,” Jullien wrote in a client note.

ADVERTISEMENT:

CONTINUE READING BELOW

“That resilience is one reason why we are becoming more constructive on EM FX. The rebound after the ceasefire was strong and real-rate differentials remain compelling in selected markets.”

He is less positive on EM debt, partly because “higher energy and food prices still complicate the outlook for many local markets.”

Read:
High volatility ruins the mood for investors
JSE and rand jump on Trump-Iran ceasefire
Ninety One sees South Africa opportunities in war volatility

Colombia’s sovereign notes beat peers on Monday as the government wraps up a $4.4 billion buyback of bonds.

Romanian dollar-denominated debt underperformed after two political parties said they plan to initiate a vote of no confidence against the minority government.

Dubai-based Emirates NBD Bank PJSC plans to sell an Additional Tier 1 bond, the first by a Middle Eastern lender since the start of the war, while Kazakh companies are seizing on demand for emerging-market issuance, and plan to raise as much as $3.6 billion this month.

© 2026 Bloomberg

#Emerging #stocks #reclaim #prewar #peak #Hormuz #deal #hopes #expectations