Emerging market stocks and currencies headed for their heaviest weekly drawdown since the pandemic on Friday, as war in the Middle East set oil prices surging and drove investors quickly out of what had been one of the year's winning bets.
MSCI's EM index is 6.5% lower this week and an MSCI index of EM currencies has shed 1.4% - the sharpest weekly drops since March 2020.
U.S. and Israeli strikes have killed Iran's supreme leader and all but closed the Strait of Hormuz, choking global oil supply and forcing investors from risky assets into cash.
Selling has been heaviest in Latin America, where gains had been frothiest, but in the Asia day stock markets in South Korea, Thailand and Indonesia were all nursing big weekly drops of beyond 8%.
The dollar index was on track for a 1.4% weekly gain, supported by safe-haven demand. Brent crude has jumped more than 15% to around $83 a barrel since the start of the conflict.
A broad risk sell-off dominated the week, fuelled by rising inflation worries, worsening current-account dynamics and a sharp repricing of rate-cut bets in net-importing economies such as Thailand, South Korea, India and the Philippines.
Elias Hilmer, markets economist at Capital Economics, said the scale of the selloff also reflected how strongly emerging markets had performed over the past year.
"But independent of the conflict in the middle east, EM assets appeared vulnerable to a fall. EM assets have been on a tear over the past year or so, leaving asset valuations looking stretched in some places."
In China, officials struck a cautious tone at the National People's Congress, maintaining modest growth goals and a steady fiscal stance. China's yuan looked set to snap a 13-week winning streak to post its worst week since early February 2025.
Meanwhile, South Korea's Kospi was headed for an 11.4% weekly slip, its steepest in six years, after a violent early-week selloff triggered a sidecar and a cash-market circuit breaker when losses topped 8%. Still, the magnitude of the slide left Kospi among the region's worst performers.
Thai stocks were staring at an almost 8% weekly slump, their worst since March 2020, after a Level 1 circuit breaker was triggered earlier in the week.
Indonesia's benchmark was also on track for its heaviest week since the pandemic, while Japan's Nikkei was headed for its worst weekly showing since 2020.
Regional currencies told a similar story. The won shed more than 2% on the week after briefly testing the 1,480-per-dollar area.
ASEAN units stayed mostly within recent ranges even as they softened, with the baht easing 0.02%, the ringgit off 0.18% and the peso down 0.16%. The Singapore dollar posted modest gains.
Indonesia also remained under pressure from the recent sovereign-outlook downgrades by Moody's and Fitch, which added to investor unease over policy credibility and the domestic backdrop.
HIGHLIGHTS:
** South Korea's Feb headline inflation at 2.0% y/y, slower than expected
** Malaysia investments hit record high of $108 billion in 2025, PM says
** ADB sees modest growth impact on Asia if Middle East conflict lasts - Reuters
