(Bloomberg) — Most emerging-market currencies weakened Monday after Iran closed the Strait of Hormuz again and President Donald Trump sent mixed signals about progress on a peace deal with the Islamic Republic.
Currencies from Mexico and Brazil edged lower, while the Chilean peso dropped 0.4% with oil prices spiking after Trump said an extension to the ceasefire that expires on Wednesday is unlikely, even as he sent negotiators to Pakistan. The Korean won and South African rand led the decline.
“We are all experiencing this war fatigue,” said Ning Sun, senior EM strategist at State Street in Boston. “Investors now are reacting to war-related headlines only if they materially alter energy supplies, trade flows etc.”
Traders are navigating a tumultuous start to the week with little certainty over the course of the war amid a stream of messages from authorities in both nations. Indexes for emerging-market currencies and stocks locked in gains during the Asian trading session, amid optimism over artificial intelligence. The stock gauge jumped as much as 0.9%, briefly erasing all the losses incurred since the war began.
But by midday in New York, it had wiped out two thirds of that advance as oil rebounded from its lows for the session. The US Navy seized an Iranian-flagged vessel in the strait of Hormuz, and though Trump said Vice President JD Vance is en route to Pakistan for another round of negotiations, he added he didn’t know if the Iranian counterparts would show up.
Noureldeen Al Hammoury, a chief market strategist at Equiti Group in Dubai, said markets are increasingly trading on expectations rather than confirmed developments, pricing in a resolution to the Iran conflict that has yet to materialize.
“This creates a fragile setup,” he said.
Elsewhere, Colombia’s offer to repurchase some of its outstanding dollar debt sent the notes higher. Bonds due in 2045 jumped 1.5 cents to 79.4 cents on the dollar, according to indicative pricing data collected by Bloomberg.
Romanian dollar bonds trimmed some losses, as the largest party in parliament votes on whether to continue to support Prime Minister Ilie Bolojan.
–With assistance from Kerim Karakaya.
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