Emerging markets near record highs as US-Iran deal crushes oil prices

Emerging Markets Near Record Highs as US-Iran Deal Boosts Oil Importers

The MSCI Emerging Markets Index surged on Monday, approaching its all-time high set earlier this year, as a peace deal between the United States and Iran sent oil prices tumbling to a three-month low and lifted assets across oil-importing nations.

Oil Collapse Sparks Broad Rally

Brent crude fell nearly 5% on Monday to around $83 a barrel — its lowest level since early March — after President Donald Trump announced on Sunday that a deal with Iran had been finalized. The agreement calls for reopening the Strait of Hormuz and lifting the US naval blockade of Iranian ports, with a formal memorandum expected to be signed Friday in Geneva. Both sides announced an “immediate and permanent” cessation of military operations across all fronts, ending nearly four months of conflict.reuters

The collapse in energy prices triggered a broad risk-on move across emerging markets. MSCI’s Asia-Pacific shares index jumped about 3%, its biggest two-day gain since 2022. South Korea’s Kospi soared over 5%, Japan’s Nikkei 225 rose more than 3%, and European markets opened higher.cnbc

Philippines Leads Asia’s Charge

The Philippine Stock Exchange Index surged 362.82 points, or 6.14%, to close at 6,272.88 on Monday — its best single-day performance in over five years. The Philippine peso strengthened by 87 centavos to close at 60.48 per dollar, reclaiming the 60-level for the first time since May 8. The Indonesian rupiah also gained against the dollar as lower oil import costs improved the outlook for both current accounts.facebook

The rally was short-lived in Manila, however: the PSEi slipped 0.43% on Tuesday as investors locked in profits.x

Macro Tailwinds Align for Developing Economies

The deal’s impact extended beyond equities. The US dollar index weakened as Treasury yields fell, with the 10-year yield declining by about 5 basis points. Reuters reported that the global stock rally moderated on Tuesday as markets awaited more details on the agreement’s terms and its effect on tanker traffic through the Strait of Hormuz.reuters

Analysts have noted that the combination of a weaker dollar and lower energy prices creates a constructive backdrop for emerging markets. Goldman Sachs had previously raised its 12-month MSCI EM target to 2,000 — implying roughly 12% upside at the time — citing both AI-driven earnings growth and the potential relief from an Iran resolution for currencies and bond markets. The index had already returned over 26% year-to-date heading into the week, having hit an all-time high in late April.zawya

Central banks also entered the picture on Tuesday, with the Bank of Japan raising rates by a quarter point to 1% — its highest level in 31 years — while the Federal Reserve’s first meeting under Chair Kevin Warsh was set for Wednesday.reuters