Emerging Stocks Hit Record As Hormuz Reopens, But Indonesia Drags

Emerging market stocks hit a record high after the US-Iran peace deal opened the Strait of Hormuz back up, then gave almost all of it back by the close.

A fresh MSCI warning over Indonesia helped sour the mood as the day wore on.

Ships Move Through Hormuz Again

MSCI's emerging-market index climbed as much as 0.8% before fading to roughly flat, after the US said its blockade off the Strait of Hormuz was over and ships started moving through the chokepoint again.

That matters for one reason: cheaper oil. About a fifth of the world's crude flows through that strip of water, so when ships move, prices ease.

Oil prices had jumped earlier in the month when the US-Iran fight heated up. That threatened to push inflation higher just as central banks were getting ready to cut rates.

Beyond the rate-cut concern, markets had also been bracing for either a tanker shutdown or a wider regional fight, and both risks fade with the strait reopening.

The early-stage deal pauses fighting while bigger talks continue, giving traders cover to put risk back on.

Currencies didn't share the rally, with a gauge of emerging-market currencies falling 0.3% on the day.

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Barclays Names The Bull Case

Barclays strategists laid out three things they're watching for the rest of the year: whether the Iran deal holds long enough to keep a lid on oil prices, where US interest rates land, and how much the big AI players keep spending on data centers.

Microsoft, Alphabet, Meta, and Amazon are on pace to spend hundreds of billions combined on those data centers.

Cheap oil, easing rates, and a spending boom flowing through to chip makers and the companies wiring up the data centers - that's the upside in one breath.

The risk is that any one of those three slips.

Indonesia Threatens The Rally

Indonesia's rupiah fell 0.4% against the dollar after MSCI flagged concerns over how easily investors can get information on the country's stock market.

The warning raises the odds of a downgrade from emerging-market to frontier-market status. Frontier markets are smaller, less active markets that sit one rung below emerging markets on global indexes.

Indonesia is Southeast Asia's largest economy and a major nickel and palm oil exporter, making it one of the larger weights in MSCI's emerging-market index.

A downgrade would force the big funds tracking that index to sell, and a formal MSCI call is expected this month.

RBC Capital Markets strategist Abbas Keshvani said the warning pushes a downgrade closer, with his call that dollar-rupiah could break past 18,000 next week. The currency already brushed a record near 18,200 earlier this month, and a sustained break past 18,000 would deepen its 2026 slide.

What To Watch

The MSCI call on Indonesia comes next, followed by whether the Iran deal holds and what oil does heading into the second half.

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