EMERGING MARKETS-Latin American assets rebound after sharp selloff on Iran war concern

By Twesha Dikshit

March 4 (Reuters) - Latin American assets rebounded on Wednesday after a sharp decline in the previous session as investors weighed a report signaling openness to discuss ending the war in the Middle East and a U.S. reassurance to revive shipping through the Strait of Hormuz.

The U.S. Navy could begin escorting oil tankers through the vital waterway, President Donald Trump said on Tuesday, in remarks that eased concerns about oil supplies.

Some worries, however, lingered as the U.S.-Israeli war with Iran widened and showed no signs of abating. Turkey said NATO defences destroyed a missile fired from Iran that was headed into Turkish airspace.

U.S. Defense Secretary Pete Hesgeth said the U.S was winning the war and its military could fight as long as needed.

Capital Economics analysts said even if energy prices rose further, "most EMs (emerging markets) look well placed to absorb the shock without destabilising external positions and triggering large currency falls."

The cost of insuring exposure to Middle East government debt against default broadly stabilized on Wednesday after two days of sharp rises.

Five-year credit default swaps for Saudi Arabia and Qatar stood at 88 basis points and 38 bps respectively - both up 6 bps from Friday's close.

MSCI's gauge of Latin American equities .MILA00000PUS advanced 1.6%, recovering some losses from Tuesday. A similar index for currencies .MILA00000CUS gained 1.5% as the U.S. dollar paused its recent rally.

"The USD has lost ground broadly this morning amid reports that Iran had made indirect contact with the U.S. to end military action ... some easing in market tensions is evident across FX pairs where EM FX is reversing losses seen earlier this week," Scotiabank analysts said in a note.

Brazil's benchmark Bovespa .BVSP equities index ticked higher, while the real BRL= currency strengthened 1.2% against the dollar. Data showed Brazil's services activity accelerated in February.

Stocks in Chile .SPIPSA added 1.8%, recovering from losses in the previous four sessions. The Chilean peso CLP= led regional gains with a 1.4% rise after dropping 3% on Tuesday.

Other regional currencies also were higher, with the Mexican peso MXN=, Peruvian sol PEN= and Colombia peso COP= up between 0.5% and 0.8%.

Venezuela's economy grew more than 7% in the fourth quarter from a year earlier, the country's central bank said. Local analyst firms estimated more modest economic growth and consumer price rises of above 400% last year.

ASIAN MARKETS GRAPPLE WITH OIL SUPPLY CONCERNS

Poland's blue-chip equities index .WIG20 added 2.1%. The Polish central bank cut its main interest rate by 25 bps to 3.75%, as widely expected, despite analysts noting that the Middle East conflict added a new layer of uncertainty.

Asian markets faced the brunt of oil supply concerns on Wednesday due to their heavy reliance on imports shipped through the Strait of Hormuz.

South Korea's benchmark KOSPI .KS11 equities index posted its biggest drop in its 46-year history, while Thailand's main stock index .SETI had its largest selloff since the COVID-19 pandemic.

Key Latin American stock indexes and currencies at 14:46 GMT: