Emerging-market stocks experienced a decline for the third consecutive session, heading for their longest losing streak in almost two months. This downturn was primarily driven by escalating tensions in the Middle East, which pushed investors towards safer assets, alongside ongoing uncertainty regarding the global interest rate outlook. The MSCI gauge of developing-nation equities was notably affected.
A significant contributor to the market pressure was the performance of AI-heavy Asian shares. South Korea's Kospi index slid more than 3%, with major AI firms calling for a slowdown in technology development. This raised concerns about a sector that has been a key driver of this year's rally. Samsung Electronics fell 4.1%, and SK Hynix lost 6.4%, reflecting the broader market apprehension. Taiwan's benchmark index was also down 0.7%.
Oil prices surged by approximately 3% after new strikes on Saudi Arabian energy infrastructure and Iranian attacks on ships in the Gulf, intensifying supply concerns. This increase in oil prices is fueling inflationary worries, prompting policymakers globally to re-evaluate their strategies. Markets have priced in a nearly 90% chance of a U.S. interest-rate hike from the Federal Reserve this week, with some analysts expecting two hikes this year.
The broader emerging market index fell 1.2% to a near two-week low, while MSCI's EM currency index also eased 0.1% to a near two-week low, further pressured by a stronger U.S. dollar. Currencies like the Korean won and the Indonesian rupiah weakened by 0.2% and 0.3% respectively. Turkey's stocks fell 1.6%, and the lira inched lower, though Hungary's forint remains the best-performing currency in the region year-to-date despite a 0.4% fall against the euro.
