EMERGING MARKETS-Latam stocks, FX tumble as escalating Middle East war spooks investors

By Twesha Dikshit

March 19 (Reuters) - Latin American stocks and currencies extended declines on Thursday, with an escalating Middle East war threatening to target energy infrastructure and driving a global risk-off mood that sent oil prices surging above $119 a barrel.

Iranian aerial attacks caused extensive damage to the world's largest gas plant in Qatar, targeted a refinery in Saudi Arabia, forced the UAE to shut gas facilities and set off fires at two Kuwaiti refineries.

This came on the heels of a Israeli attack on Tehran's gas fields that Israeli officials said was coordinated with the U.S. President Donald Trump has said Washington "knew nothing about this particular attack."

MSCI's Latin American equities index .MILA00000PUS dropped 2%, while a similar gauge for currencies .MILA00000CUS fell 1.1%.

Still, some analysts believe the drawback in markets could provide opportunities in EM, particularly in Latam, if investors know where to look.

"The next leg of EM performance is likely to come from idiosyncratic, under-owned markets with low valuations, commodity exposure, improving political dynamics, and supportive monetary policy. That leads you straight to Argentina, Colombia, and Brazil," said Malcolm Dorson, Global X's head of EM.

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Also drawing investor attention were several central bank decisions with policymakers in Taiwan, Czech Republic and Ukraine keeping rates steady while flagging concerns over inflation amid the ongoing U.S.-Israeli war in the Middle East.

The U.S. Federal Reserve, the Bank of Canada, the Bank of Japan, the European Central Bank and the Bank of England also made similar statements and said they were on alert to tighten policy due to any surge in inflation.

Chile's central bank is expected to keep its benchmark interest rate unchanged next week, a poll of traders released by the bank showed. The benchmark index .SPIPSA fell 1.5%, while the peso CLP= was down 0.2%.

Stocks in Mexico .MXX tumbled 1.6%, while those in Peru .MXNUAMPESCPGPE and Brazil .BVSP were down 2.2% and 0.7%, respectively. Brazil's Copom had started a long-awaited easing cycle on the previous day with a cautious 25 bps cut.

Commodity-heavy Latam markets were also weighed down by a sharp pullback in metals on global economic slowdown worries, expectations of tighter monetary policy and supply chain concerns.

Currencies in the region were between flat to slightly lower with the Peruvian sol PEN= ticking 0.4% lower.

Other EM markets also came under pressure. Indexes in Czech Republic .PX, Poland .WIG20 and Greece .ATG were down between 1.4% and 2.3%.

Gold-exporter South Africa's blue-chip index .JTOPI lost 2.8% dragged down by bullion prices.

Earlier in the day, Asian markets had closed lower after partially recovering from losses this week with many countries in the region dependent on energy imports.

Benchmark indexes in South Korea .KS11, Taiwan .TWII and Hong Kong .HSI lost between 1.9% and 2.7%. India's Nifty 50 .NSEI and Sensex .BSESN tumbled over 3% each.

Meanwhile, growth in world trade in goods is expected to slow down to 1.9% this year from 4.6% in 2025 and could decelerate further if the Middle East war continues to raise energy prices and disrupt global transport, a World Trade Organization report said.

Key Latin American stock indexes and currencies at 14:19 GMT: