A deal meant to reopen the Strait of Hormuz just reminded investors why the waterway was closed.
The deal was supposed to restore use of the Strait.
Earlier in the week, crude prices had dropped because traders expected the waterway to reopen, and that helped risky assets around the world.
The conflict has kept the Strait mostly closed for six months, disrupting trade and adding to inflation fears. Because the waterway is one of the world's key routes for seaborne crude, any sign that it will remain partly shut can ripple through currencies and equities. A full reopening would have eased those pressures; the new terms revived them.
The latest turn also showed why traders had been watching the Iran-Oman talks: a full reopening would have cooled energy prices and supported risk appetite.
South Africa's rand and Hungary's forint hit their lows for the day. Brazil's and Mexico's currencies gave back some earlier gains, and the MSCI emerging-markets equity benchmark kept falling.
"Just the fact that Iran and Oman were making a deal without the US was a big red flag," said Win Thin, chief economist for Bank of Nassau 1982. "I wouldn't be shocked that the US may not get the outcome it wants."
As expected, Banxico left its benchmark rate at 6.5%. Even with no move, swap rates, which track investor expectations for future interest rates, rose across the curve.
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Central banks are still trying to gauge how much of the energy shock will feed through to prices. That uncertainty is one reason Mexico, the Czech Republic and Brazil all chose to keep policy unchanged this week.
The Czech central bank also kept its policy rate at 3.75%, in line with expectations.
Brazil's currency, the real, did better than others after the country's central bank kept rates unchanged on Wednesday, as expected. The bank said upcoming moves will depend on the data.
Brazil and Colombia remain favorites for the carry trade. In that trade, investors borrow in a low-yield currency and put the money into higher-yield assets.
For a third consecutive day, Colombia's currency strengthened. That winning streak wiped out losses tied to the central bank's plan to buy up to $4 billion in dollars for reserves.
South Korea's won held near its strongest level since October. Exporters have been converting dollar revenue into won.
Luis Costa, who leads the emerging-markets strategy team at Citigroup, said the carry-trade pull remains strong, predicting Brazil, Mexico and Colombia would be the biggest beneficiaries.
Weak results from Sandisk Corp. and Western Digital Corp. weighed on equities across Asia. The MSCI regional benchmark lost 1.6% on the day, and its composition leans heavily toward Asia.
Ukraine's dollar bonds fell more than other emerging-market debt. The war with Russia is still weighing on the country's assets.
Friday brings the US jobs report, often called nonfarm payrolls. Investors will use it to guess what the Fed does next.
The Financial Times, citing people close to the matter, said Federal Reserve Chairman Kevin Warsh might raise rates if inflation remains strong. Higher US rates tend to pull money out of emerging markets and into safer US assets, so this report could set the tone.
The "Sell America" trade, a wave of selling in US assets, has also regained traction after recent Washington policy decisions, including Warsh's limited communication and Treasury support for Japan's effort to help the yen.
"All eyes are on tomorrow's US NFP and what they mean for Fed policy," said Simon Quijano-Evans, a senior emerging markets strategist at Macro Hive in London.
For your portfolio, the stakes are straightforward. If price increases stay hot, a rate move becomes more likely, and that would probably make emerging-market assets less attractive. If the data comes in cool, the carry trade could keep flowing toward Brazil, Mexico, and Colombia.
Either way, this week shows that a reopening is not the same as a resolution, and that is the kind of thing that can move your portfolio.
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