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

By Twesha Dikshit and Niket Nishant

March 19 (Reuters) - Latin American stocks and currencies deepened their slide on Thursday, with an escalating war in the Middle East threatening to target energy infrastructure and driving a global risk-off mood that sent oil prices surging.

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 an Israeli attack on Tehran's gas fields. While Israeli officials said that was coordinated with the United States, President Donald Trump said Washington "knew nothing about this particular attack."

MSCI's Latin American equities index .MILA00000PUS and a similar gauge for currencies .MILA00000CUS fell 0.3% each.

Still, some analysts expect the drawback in markets to 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.

CENTRAL BANKS' OUTLOOKS CLOSELY WATCHED

Investors monitored a series of central bank decisions, with policymakers in Taiwan, Czech Republic and Ukraine keeping rates steady while flagging concerns over inflation amid the ongoing Middle East war.

The U.S. Federal Reserve, the Bank of Canada, the Bank of Japan, the European Central Bank and the Bank of England also 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 1.4%, while the peso CLP= was up 0.6%.

Stocks in Mexico .MXX fell 1.2%, while those in Peru .MXNUAMPESCPGPE were down 2.1%.

Commodity-heavy LatAm markets were 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 and slightly lower, with the Peruvian sol PEN= ticking 0.4% lower.

Brazilian equities .BVSP rose 0.5% a day after the central bank's rate-setting committee, Copom, started a long-awaited easing cycle with a cautious 25-bps cut.

President Luiz Inacio Lula da Silva, however, said he was disappointed that the central bank had not lowered rates more.

Argentine stocks .MERV added 2.5%. The International Monetary Fund said the country's economy was navigating the Middle East fallout well so far.

Other EM markets also came under pressure. Indexes in Czech Republic .PX, Poland .WIG20 and Greece .ATG were down between 1.7% and 2.5%.

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.

"Amid the rapidly shifting market conditions, it's important not to be swayed by pessimistic or exuberant narratives and instead focus on building resilience to accumulate steadier returns," said Willem Sels, global chief investment officer at HSBC Private Bank.

Key Latin American stock indexes and currencies at 19:45 GMT: