Emerging market currencies and stocks have taken a beating as the war in the region prompts a sell-off of riskier assets, snapping a record-setting rally that had taken hold amid fears of an AI bubble in the West and a desire to diversify from the USD, Bloomberg reports. Haven trades are back in charge, with investors rotating toward Treasuries, the CHF, and investment-grade emerging markets, excluding the Gulf, as we wrote yesterday.

By the numbers: A gauge of developing-nation FX fell 0.9% after touching all-time highs last week as the USD strengthened. Meanwhile, EM stocks dropped as much as 1.9% — the steepest slide in a month, led by tech and consumer discretionary names. Pakistan’s market plunged enough to trigger an hour-long halt, marking its biggest drop on record.

Local-currency bonds of net oil-importing countries saw yields rise as Brent crude jumped 8.6% to around USD 79 / bbl — its highest in more than a year — while gold rallied alongside the greenback.

JPMorgan also slashed its overweight recommendation on EM currencies and local bonds by half on the back of the sell-off.

Central banks moved fast: Indonesia and India intervened in FX markets, while Turkish lenders reportedly sold about USD 5 bn to steady the TRY. “There’s panic selling at first, then normalization,” said Osmanli Portfoy CEO Mehmet Gerz.

The bigger risk is inflation: Barclays warned that sustained higher oil prices could delay rate cuts across easing-cycle economies like South Africa, Poland, Turkey, and Hungary. Bloomberg Economics sees crude potentially climbing as high as USD 108 / bbl if tensions intensify.

MARKETS THIS MORNING-

Asia-Pacific markets opened in the red this morning as the escalating regional war enters its fourth day. South Korea’s Kospi is down over 3.6% — despite defensive sector gains — and Japan’s Nikkei is down 2.2%. Over on Wall Street, indices are set to open in the red today, with futures down across the board.

TASI

10,489

+0.1% (YTD: 0.0%)

MSCI Tadawul 30

1,423

+0.3% (YTD: +2.6%)

NomuC

22,533

-0.3% (YTD: -3.3%)

USD : SAR (SAMA)

USD 3.75 Sell

USD 3.75 Buy

Interest rates

4.25% repo

3.75% reverse repo

EGX30

47,692

-0.6% (YTD: +14.0%)

ADX

10,454

-1.3% (YTD: +4.6%)

DFM

6,504

-1.8% (YTD: +7.6%)

S&P 500

6,882

0.0% (YTD: +0.5%)

FTSE 100

10,780

-1.2% (YTD: +8.5%)

Euro Stoxx 50

5,987

-2.5% (YTD: +3.4%)

Brent crude

USD 77.76

+6.7%

Natural gas (Nymex)

USD 2.96

+3.5%

Gold

USD 5,312

+1.2%

BTC

USD 69,349

+6.3% (YTD: -20.8%)

Sukuk/bond market index

923.14

-0.1% (YTD: +0.4%)

S&P MENA Bond & Sukuk

153.89

+0.1% (YTD: +1.3%)

VIX (Volatility Index)

21.42

+8.0% (YTD: +55.0%)

THE CLOSING BELL: TADAWUL-

The TASI rose 0.1% yesterday on turnover of SAR 7.2 bn. The index is down 0.02% YTD.

In the green: Thimar (+5.6%), AlRajhi Takaful (+5.5%), and Bahri (+5.2%).

In the red: SHL (-6.4%), Flynas (-6.3%), and Cenomi Centers (-6.1%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.3% yesterday on turnover of SAR 13.3 mn. The index is down 3.3% YTD.

In the green: Academy of Learning (+9.2%), Alfakhera (+7.0%), and AlJouf Water (+6.5%).

In the red: AlKuzama (-9.9%), Knowledge Tower (-8.2%), and Rawasi (-7.0%).

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