EMERGING MARKETS-Stocks under pressure as Middle East crisis deepens

By Nikhil Sharma

June 18 (Reuters) - Emerging market stocks came under pressure on Wednesday amid fears of U.S. intervention in the Iran-Israel air war and as investors awaited interest rate decisions from key central banks.

MSCI's index for emerging market equities .MSCIEF fell 0.4% for the day, while a parallel index for currencies .MIEM00000CUS slipped 0.2%.

The conflict in the Middle East entered its sixth day with no signs of cooling, as Iran and Israel launched new missile strikes at each other after U.S. President Donald Trump called for Tehran's unconditional surrender.

Iran has said it would retaliate against U.S. bases if Washington joins the war on the side of its close ally Israel. A source with access to U.S. intelligence reports said Iran had moved some ballistic missile launchers, but it was difficult to determine if they were targeting U.S. forces or Israel.

Israel's blue-chip Tel Aviv 35 index .TA35 gained 0.2% on Wednesday, demonstrating resilience despite the risks posed by the conflict to the country's security and economy.

Israeli stocks have risen about 67% since the October 2023 attacks on Israel by militants of the Iran-backed Islamist group Hamas that triggered the war in Gaza which continues to rage.

Global defence stocks have surged by nearly 90% in that same period, while gold has gained some 85%.

The escalating geopolitical tensions provide a challenging backdrop to the U.S. Federal Reserve's policy decision due later in the day. The central bank is widely anticipated to leave its benchmark rates unchanged in the 4.25%-4.50% range.

"Fed Chair Jerome Powell has said before that the cost of waiting (to resume cuts) is low, and that should be the mantra over summer, hoping visibility improves on tariffs, the labour market/wages and oil prices," analysts at Societe Generale said in a note.

In Indonesia, the central bank paused its easing cycle and delivered a widely expected decision to hold policy rates, reaffirming an objective to balance currency stability with efforts to lift economic growth.

The Indonesian rupiah IDR= pared some losses to trade 0.1% down, while stocks .JKSE extended losses, shedding 0.74% following the rate decision.

In central Europe, the Czech crown EURCZK= was steady at 24.811 to the euro ahead of an interest rate decision due next week. Prague stocks .PX edged up 0.1%.

Hungary's main stock index .BUX extended gains to hit an all-time high, up 0.5% a day after the parliament passed Prime Minister Viktor Orban's 2026 election year budget that included steep tax cuts for families.

Hungary's forint currency EURHUF= fell 0.4% after modest losses in the previous session.

Poland's zloty EURPLN= steadied against the euro, while the main stock index .WIG also remained stable. Data showed Polish consumer sentiment climbed in June for a second month in a row.

Romania's leu EURRON= and stock index .BETI were little changed.

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