Emerging-market assets staged a sharp rebound Tuesday as President Donald Trump signaled a potential early resolution to the Iran war, sending oil prices tumbling and luring investors back to battered currencies and stocks. The unexpected diplomatic hint triggered a risk-on sentiment across developing economies, with traders betting that reduced Middle East tensions would ease inflationary pressures and support global growth.

Oil prices dropped sharply on the news, with Brent crude falling below $70 a barrel for the first time in months. Lower energy costs are particularly beneficial for import-dependent emerging economies, where fuel subsidies and transportation costs weigh heavily on inflation. The selloff in crude also eased concerns about stagflation risks that had been pressuring central banks in countries like Brazil, South Africa, and India to maintain restrictive monetary policies.

Currency markets saw the biggest moves, with the Turkish lira, South African rand, and Mexican peso all posting gains of 1-2% against the dollar. Equity markets in Asia and Latin America followed suit, with major indexes in Brazil, Mexico, and South Korea climbing over 1%. The relief rally underscores how sensitive emerging markets remain to geopolitical shocks and energy price volatility, with investors now recalibrating growth and inflation expectations for 2025.