EMERGING MARKETS-LatAm stocks jump on Trump's Iran U-turn; rest of EM claw back some losses

By Pranav Kashyap

March 23 (Reuters) - Most emerging market assets whipsawed before sharply paring losses on Monday after U.S. President Donald Trump announced he would order the military to stand down from any strikes against Iranian power plants and energy infrastructure.

Asian markets had already shuttered by the time the announcement landed. The region - which carries considerable heft on the emerging market equity index .MSCIEF - bore the brunt of the damage, with the benchmark off 2.3% as most regional bourses closed nursing sharp losses.

Equities in Istanbul .XU100 and Warsaw .WIG20, both of which had tumbled more than 2% ahead of Trump's remarks, clawed back ground to trade 0.8% and 0.5% lower respectively, while Johannesburg's .JTOPI bourse turned positive, trading 0.5% higher.

Trump made the announcement on Truth Social just hours before a deadline he had set for Tehran to "fully open" the Strait of Hormuz, having threatened to level Iranian power plants in a further escalation of a conflict now grinding through its fourth week.

Over in Latin America, indexes tracking the region's equities .MILA00000PUS and currencies .MILA00000PUS were up 3% and 0.7% respectively.

While the region is comparatively better insulated from energy shocks than Asia and Europe, gyrations in crude prices - which plunged as much as 13% on the day, yet remain up nearly 80% year-to-date - are complicating the interest rate calculus for central banks across the bloc.

Rate decisions this week are due from Hungary, Chile, Mexico, and South Africa.

The Mexican peso MXN= bounced off a more than three-month low, last trading up 0.8% against the dollar.

The Bank of Mexico is widely expected to hold rates steady at Thursday's meeting, as policymakers take stock of the inflationary fallout from volatile crude prices against the backdrop of an economy that is beginning to run hot.

"While there are some measures to insulate Mexico from the effects of inflation from the war, inflation is still likely to increase. We expect these concerns to come further into focus given elevated prices due to the Iran war," Rabobank analysts said.

Mexico's local benchmark .MXX, along with Chile's .SPIPSA, turned negative for the year as of Friday's close, giving up strong gains at the start of the year, caught squarely in the crosshairs of the global selloff unleashed by the conflict.

Meanwhile Brazilian equities .BVSP jumped 2.3%, with planemaker Embraer < EMBJ3.SA> climbing 4.5% after securing an order for 18 E195-E2 jets from Finnair.

Brazilian economists trimmed their monetary easing expectations for the year, now pencilling in rates on hold through December rather than one final 25 basis-point cut - a recalibration that echoes a broader reassessment playing out among central banks worldwide. The real BRL= jumped 1%.

On a broader note, the European Union's long-gestating free trade agreement with South American bloc Mercosur will enter into force on a provisional basis from May 1, the European Commission confirmed.

Key Latin American stock indexes and currencies at: