Robust gains are also being seen in energy-linked currencies like Hungary's forint and South Africa's rand.
Nonetheless, on Thursday, traffic through the Strait of Hormuz remained heavily curtailed following a second consecutive day of US strikes on Iran.
Bank of Nassau 1982's chief economist Win Thin said: "The overall market reaction has so far been relatively muted, most likely due to a combination of headline fatigue as well as optimism that the peace process will eventually resume."
"If hostilities continue for an extended period, that optimism will be tested."
The ongoing US-Iran hostilities have created a volatile backdrop for emerging markets, with the Strait of Hormuz disruption threatening global oil supplies. However, Washington's restrained approach - avoiding energy infrastructure - has calmed fears of a full-blown conflict. This dynamic explains why the initial market shock has faded, allowing currencies like the Colombian peso and Hungarian forint to recover. Meanwhile, central bank signals, such as Poland's potential rate cut, continue to influence individual currency moves.
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The Strait of Hormuz, through which roughly one-fifth of the world's oil passes, remains a critical chokepoint. Any prolonged disruption there would likely push crude prices higher and strain emerging-market economies that rely on energy imports. The fact that the US has so far limited its strikes to military targets rather than oil infrastructure has tempered the immediate risk premium. Investors are now watching for any signs that the conflict could escalate further, which would quickly reverse the current currency rally.
The Colombian peso, often viewed as a proxy for crude oil due to the country's significant petroleum exports, has been especially responsive to the recent price retreat. Carry-trade demand has returned as risk appetite improves, benefiting currencies that offer higher yields. Similarly, the Hungarian forint and South African rand, both tied to commodity prices and broader emerging-market sentiment, have strengthened. However, Poland's zloty decline highlights that domestic policy signals remain crucial, with the central bank governor's hint of a rate cut weighing on the currency despite the improved global backdrop.
MSCI's EM equities index slipped 0.1%, surrendering its earlier Asian gains and extending its weekly decline to 2.6%.
Elias Haddad, who leads global markets strategy at Brown Brothers Harriman, remarked that investors see the latest US-Iran strikes as "another round of managed escalation" and that world growth can endure the geopolitical turmoil.
Seoul's Kospi index increased, supported by SK Hynix Inc.'s US listing, which was more than seven times oversubscribed.
Meanwhile, shares in Tencent Holdings Ltd. and Taiwan Semiconductor Manufacturing Co., two major EM index components, dipped slightly.
Trinidad & Tobago is marketing 12-year US dollar bonds expected to be priced today, according to an anonymous source familiar with the offering.
The Taiwan dollar weakened to its lowest point since April 2025, wiping out the gains from its historic rally last year.
Strategists at Citigroup Inc. liquidated their remaining holdings of Hungary's local-currency bonds, arguing that the post-election rally following the country's turn toward Europe in April has "largely played out" and that this week's jump in oil prices undermines the bullish outlook.
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