EMERGING MARKETS-Asian stocks caught between Trump's threats and fragile ceasefire hopes

By Sneha Kumar

April 6 (Reuters) - Emerging Asian stock markets were mixed in thin holiday trading on Monday as investors digested a wave of conflicting headlines around the war in the Middle East that has clouded inflation and economic outlooks.

The MSCI gauge of EM Asia equities .MIMS00000PUS edged higher, largely driven by a gain of more than 1% for South Korea's benchmark KOSPI index .KS11.

Investor sentiment continues to be whipsawed by U.S. President Donald Trump's threats to rain "hell" on Tehran if it does not make a deal and reopen the Strait of Hormuz by a Tuesday deadline, even as an Axios report suggested that discussions on terms of a potential 45-day ceasefire were underway.

"I would think that after Trump's weekend rhetoric, markets seem reluctant to price much more than cautious hope until there is something concrete," said Charu Chanana, chief investment strategist at Saxo in Singapore.

"Investors have seen a lot of headline swings in this conflict and this still looks more like a last-ditch diplomatic effort than a deal. It may cap some of the immediate panic, but it is probably not enough on its own to unwind the broader risk premium."

In Indonesia, the Jakarta Composite Index .JKSE slipped as much as 1.3% to its lowest level in three weeks, while the currency IDR= sank to an all-time low of 17,045 per U.S. dollar.

Indonesia was already grappling with investor concerns over its fiscal deficit, central bank autonomy, and a weak currency, before rising oil prices posed fresh problems for the import-dependent country.

While commodity prices may boost revenue, a limited fiscal space raises the risk of spending cuts or fuel price adjustments that could hurt growth, MUFG analysts said in a note.

"While BI's (Bank Indonesia) proactive FX measures should help contain USD-IDR (pair) upside, a severe external shock, such as a sharp repricing in U.S. yields or a deeper global risk-off episode, could still trigger further rupiah weakness," they said.

Indonesia's budget deficit widened to 0.93% of gross domestic product in the first quarter of 2026, yet the finance minister insisted subsidised fuel prices can be maintained.

With the Iran war now in its sixth week, Asian investors are turning to this week's inflation numbers to gauge how badly prices have been shaken.

The Philippines will release its March inflation data on Tuesday and Taiwan on Wednesday. All eyes will then turn to South Korea on Friday, when its central bank announces its policy rate. The statement from the Bank of Korea is expected to capture investor attention.

Among currencies in the region, the Philippine peso PHP= fell 0.2%, while the South Korean won KRW=KFTC appreciated to 1,503.9 per U.S. dollar.

Markets in Taiwan, China and Thailand were closed for a holiday.

HIGHLIGHTS:

Yield on Indonesia's 10-year bonds ID10YT=RR flat at 6.624%

Iran, U.S. receive plan to end hostilities, immediate ceasefire; source says

Indonesia plans to increase royalties on some coal miners, finance minister says