EMERGING MARKETS-Stocks, FX trade with caution amid Iran-Israel conflict

By Nikhil Sharma

June 17 (Reuters) - Emerging market assets were subdued on Tuesday amid cautious trading as the Israel-Iran conflict entering its fifth day, while U.S. President Donald Trump's call to evacuate Tehran prompted investors to hold back their bets.

MSCI's index for emerging market equities .MSCIEF was steady at 1,198.99 points, after rising about 0.7% in the previous session.

A parallel index for currencies .MIEM00000CUS was also flat for the day after rising modestly a day earlier.

The conflict in the Middle East took a dramatic turn after Trump cut short his G7 trip in Canada, urging everyone to evacuate Tehran immediately and reiterating that Iran should have signed a nuclear deal with the United States.

Meanwhile, the G7 expressed solidarity with Israel and blamed Iran for instability in the Middle East.

The risk-off mood was observed in global markets, with Wall Street stock futures pointing towards a lower opening.

"Headline risk from the Iran/ Israel conflict is once again impacting financial markets, after taking a reprieve on Monday," said Kathleen Brooks, research director at XTB.

Israel's currency the shekel ILS= reversed early losses to rise 0.3% against the dollar, a day after it soared 3.5% - its highest single-day jump in nearly five decades.

The country's international bonds were steady for the day.

Fitch Ratings said on Monday that a spillover from the conflict appeared to be within a range that could be absorbed by Israel's 'A'/Negative rating.

In Central Eastern Europe, the Czech crown EURCZK= nudged down 0.1% ahead of a no-confidence vote in the government, which follows a scandal involving the acceptance of a $45 million bitcoin payment to the state by an ex-convict.

In Poland, the local zloty currency EURPLN= dipped 0.1% against the euro. Warsaw stocks .WIG pared early losses to dip 0.1%.

According to the ISBnews agency, Polish central banker Cezary Kochalski indicated a quarter-point cut in July, but said the Middle East situation may diminish the possibility of such a move as it may disrupt the disinflation process in Poland.

Meanwhile, the Hungarian central bank's Deputy Governor nominee Daniel Palotai said on Monday that the top bank must prioritise taming inflation despite economic growth risks.

Fresh data underscored the growth risks, with gross average wages rising by an annual 9.8% in April following an 8.5% increase in March 2025.

Hungary's forint EURHUF= rose 0.5%, with a similar move seen in Budapest stocks .BUX that advanced for the third straight session.

Elsewhere in CEE, Romania's leu EURRON= and Bucharest stocks .BETI remained unchanged on Tuesday.

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