The Nasdaq notched its 13th straight winning session — a streak not seen since 1992 — as emerging-market assets neared record highs after a temporary lull in Gulf hostilities boosted risk appetite.

Markets lift on brief respite in the Gulf Global risk appetite surged after Tehran said the Strait of Hormuz had briefly reopened to shipping, prompting a broad advance in equities. Investors pushed into higher-yielding assets as optimism that the four-week flare-up might ease gained traction. That move sent flows back into markets that tend to benefit when geopolitical risk recedes. Emerging-market stocks and currencies, which usually gain when investors accept more risk, picked up momentum as traders priced in lower odds of prolonged disruption to oil shipments through the Gulf. What strategists are watching Some strategists warned that markets may be getting ahead of themselves, noting investors could be treating tensions as if they can be dialled up or down at will and that Iran’s response capability and tolerance for pain have shifted. That highlights a central dilemma for traders: whether recent headlines reflect a durable de‑escalation or just a temporary lull in hostilities. Short-term gains, persistent fragility Price action over the past week has been dramatic. Stocks rallied when news of the temporary reopening spread, but asset prices reversed sharply when shipping through the strait again slowed — illustrating how quickly sentiment can swing on patchy information. That fragility matters for emerging markets because many are sensitive to sudden shifts in commodity prices, shipping costs and dollar funding conditions. A sustained reopening of the strait would ease a direct regional risk and could reduce the premium investors demand to hold riskier assets. If hostilities resume, the opposite is true — and capital can move out of vulnerable markets fast. Investors have also been juggling other forces that shape flows into emerging assets. Global monetary settings determine the relative appeal of higher-yielding markets: when developed-market rates look steady or fall, investors often seek yield elsewhere. Last week’s rally came alongside the wider equity advance in the US, suggesting cross-asset moves rather than an isolated bid for emerging markets. Politics and policy: the wider backdrop President Donald Trump’s moves on trade and tariffs over the past year have been a recurring influence on investor behaviour, market strategists say. Markets learned to react quickly to his announcements; they have shown they can reverse course just as fast when circumstances change. Traders now face the additional test of weighing political rhetoric against on-the-ground developments in the Gulf. The ceasefire agreed on 7 April between the US and Iran provided the initial institutional framework for optimism. Markets treated that agreement as a relief event, but the ceasefire is temporary and set to expire this week, leaving a narrow window for diplomacy to produce a longer-term result.

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The rally rests on fragile ground: a durable diplomatic outcome would cement gains for emerging assets, but if talks fail and hostilities resume, investors could quickly retreat to safer markets.

This article was created with AI assistance.