Frontier & EM Daily, 27/07: US-Iran pause lifts risk; Fed hike odds at 32%

• US-Iran strikes paused; Brent -5% to ~US$92; Houthis hit Saudi export hubs; FOMC Weds with 32% hike odds priced

• Energy importers lagged Friday: Sri Lanka -0.6%, Pakistan -0.3%, Laos -0.2% as Hormuz closure keeps fuel supply at risk

• Trump-Zelenskyy meeting due in renewed Russia-Ukraine push; Kazakhstan says CPC loadings ready to restart

  
  

EM eurobonds closed Friday mixed rather than clearly negative. Cash prices finished modestly higher across most of the sample as US Treasury yields eased back, though spreads widened in more names than they tightened, leaving the underlying tone soft. The US and Iran continued to exchange limited strikes before a pause over the weekend. Brent crude pulled back from above US$100/bbl to around US$96-97/bbl, easing some of the inflation pressure that had driven US 10-year yields to 18-month highs above 4.70% earlier in the week. Reuters reported late in the session that Pakistan (following a push from China) is exploring a path toward resuming stalled US-Iran talks. The USTR announced a replacement round of Section 301 tariffs of 10% to 12.5% on 60 trading partners over forced-labour concerns, effective Friday, as the temporary 10% global tariff was set to expire — suggesting US tariffs are here to stay for many EM. The S&P 500 edged higher, though remained on course for a second consecutive weekly decline amid tech weakness. US HY spreads surged the most in four months on Thursday before partially recovering Friday.

Over the weekend, the US paused its strikes against Iran, and Tehran signalled it would halt attacks if Washington did the same, the clearest de-escalation signal since hostilities re-emerged. Brent fell more than 7% in early Asian trading to dip below US$90/bbl before recovering to around US$92, some 5% below Friday's close, with Asia-Pacific equities and US futures both firmer. The pause is not clean, however: Iran-backed Houthis struck Saudi oil infrastructure on Saturday, hitting Aramco facilities at Jizan and Yanbu, leaving the kingdom's principal remaining export gateway with Hormuz functionally closed. Separately, Kazakhstan said CPC loadings are ready to restart once conditions stabilise, and Trump is due to meet Zelenskyy in a renewed push to end the Russia-Ukraine war. Markets will be focused on Wednesday's FOMC meeting, with markets pricing 32% odds of a rate hike.