EMERGING MARKETS-Latam assets rise as investors assess Middle East de-escalation reports

By Johann M Cherian

March 31 (Reuters) - Stocks and currencies across Latin America rose on Tuesday, as investors assessed U.S. rhetoric on a quick end to the month-long Middle East conflict, that has roiled global markets and fueled policy uncertainty.

The Wall Street Journal reported that U.S. President Donald Trump told aides he was willing to end the military campaign against Iran even if the Strait of Hormuz remained largely closed.

Risk sentiment improved following the report. However, oil prices neared $120 a barrel as other reports suggested that the U.S. was putting more troops on the ground and Iran attacked oil tankers off Dubai, suggesting the conflict appeared far from over.

MSCI's index tracking equities in Latin America .MILA00000PUS jumped 2%, while a similar gauge tracking currencies .MILA00000CUS edged up 0.4% as the U.S. dollar fell 0.4%. However, both Latam indexes were on track to log their biggest monthly declines since December 2024.

Higher crude prices lifted energy stocks in the region, with Brazil's Petrobras PETR4.SA up 1.3%, Colombia's Ecopetrol ECO.CN adding 2.1% and Argentina's YPF YPFDm.BA gaining 3.5%.

"We have this type of specific case where the Latin American countries are potentially benefiting from this cycle, especially the oil producers," said Zin Bekkali, chief executive of Silk Invest.

On the other hand he said the Middle Eastern countries, will feel the pain for longer. "It's a big negative for the region because it's not only about the war, but also about the future of the region."

Soaring energy costs have already started filtering through to consumer prices in Latin America.

Abra Group, the holding company that controls airline Gol , said that Petrobras will raise jet fuel prices by about 55% starting April 1.

Against this backdrop, investors will be keen on how policymakers in the region will shape monetary policy.

Colombia’s central bank is expected to raise its benchmark interest rate for the second consecutive time later in the day in a bid to curb inflationary pressures driven in part by the increase in minimum wage and higher fiscal spending.

Ahead of the verdict, the local peso COP= edged up 0.2%, while stocks .COLCAP added 1.6%. Brazil's real BRL= and Mexico's peso MXN= also edged up 0.7% and 0.5%, respectively.

Chile's peso CLP=, the most sensitive in the region to spiking crude prices, edged up 0.2%, but was on track for its biggest monthly drop since October 2024. Stocks .SPIPSA were edged up 0.2%, but were headed for their second-straight month of declines.

This year will also be especially crucial for politics in the region, with Colombia and Brazil facing elections later in the year.

Brazilian President Luiz Inacio Lula da Silva said that Vice President Geraldo Alckmin will again be his running mate in October's presidential election.

The incumbent president and rival Senator Flavio Bolsonaro are seen tied in a simulated run-off for this year's election, a BTG Pactual/Nexus poll showed.

Key Latin American stock indexes and currencies: