EMERGING MARKETS-Asian shares gain but Mideast uncertainty keep investors on edge

By Shivangi Lahiri

March 24 (Reuters) - Equities in emerging Asia pared early gains on Tuesday as investors remained jittery over the economic impact of the energy shock from the conflict in the Middle East, as Iran denied negotiations with the U.S. to end the war.

The MSCI index of EM Asia equities .MIMS00000PUS gained 2% after a sharp 4% decline the previous day, driven by stocks in South Korea and Taiwan. A broader index of Asia-Pacific equities excluding Japan .MIAPJ0000PUS advanced 1.7%.

South Korea's KOSPI index .KS11 jumped more than 4% early in the session but traded around 2.4% higher in the afternoon session in Seoul. Stocks in Taiwan .TWII also gained 0.8%, easing back from gains of up to 2%.

Singapore's FTSE Straits Times .STI likewise surrendered most of its early advances to trade 0.2% higher, while shares in Bangkok .SETI were up 1% after earlier rising nearly 1.8%.

U.S. President Donald Trump said he postponed a threat to bomb Iran's power grid after what he described as "productive" talks with Tehran, sparking brief market optimism that faded after Iran denied it had held negotiations with the U.S.

Many Asian economies are net oil importers and remain particularly vulnerable to volatility in crude prices.

Oil prices rebounded above $100 a barrel after dipping below that key level the previous day. O/R

"The most exposed parts of EM Asia are importers with weaker external balances, particularly India, Thailand, and the Philippines, where higher oil prices feed directly into inflation and current account pressure," said Billy Leung, investment strategist at Global X ETFs Australia.

"In this environment, foreign investors tend to rotate into traditional defensives such as USD, gold and developed market bonds, while regional investors have been more selective, focusing on domestic themes and selectively adding on weakness rather than chasing broad risk."

Most equity benchmarks are deep in the red this month, losing between 1% and 14%, with South Korea .KS11 and Indonesia .JKSE among the worst performers.

Asian currencies slipped across the board: the Thai baht THB= weakened to 32.71 a dollar, while the South Korean won KRW=KFTC slid to 1,503.10, though it remained above the 17‑year low of 1,518.4 points touched on Monday.

In Malaysia, stocks .KLSE fell 0.8% and the ringgit MYR= traded slightly weaker against the dollar at 3.9440. The country's equity markets have been largely spared the Mideast-driven outflows thanks to strong fundamentals and limited energy exposure.

Equity and currency trading in Indonesia .JKSE, IDR= will resume on Wednesday.

HIGHLIGHTS

Yield on Singapore's 10 year bonds SG10YT=RR at 2.254%, hovering around highest since early Jan 2026

Japanese bonds rise as Trump delays Iran strike plans

Indonesia has assured Philippines of steady supply of coal, Manila says

Philippines says inflation may exceed 4% this year if oil prices stay high, impacting GDP