*

EM stocks down 0.4%, FX down 0.2%

*

Fed's interest rate verdict awaited

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Bank Indonesia keeps rates on hold

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Hungary's main stock index hits a record high

*

Polish consumer sentiment improves in June for second

month in a

row

By Nikhil Sharma

June 18 (Reuters) - Emerging market stocks came under

pressure on Wednesday amid fears of U.S. intervention in the

Iran-Israel air war and as investors awaited interest rate

decisions from key central banks.

MSCI's index for emerging market equities fell

0.4% for the day, while a parallel index for currencies

slipped 0.2%.

The conflict in the Middle East entered its sixth day with

no signs of cooling, as Iran and Israel launched new missile

strikes at each other after U.S. President Donald Trump called

for Tehran's unconditional surrender.

Iran has said it would retaliate against U.S. bases if

Washington joins the war on the side of its close ally Israel. A

source with access to U.S. intelligence reports said Iran had

moved some ballistic missile launchers, but it was difficult to

determine if they were targeting U.S. forces or Israel.

Israel's blue-chip Tel Aviv 35 index gained 0.2% on

Wednesday, demonstrating resilience despite the risks posed by

the conflict to the country's security and economy.

Israeli stocks have risen about 67% since the October 2023

attacks on Israel by militants of the Iran-backed Islamist group

Hamas that triggered the war in Gaza which continues to rage.

Global defence stocks have surged by nearly 90% in that same

period, while gold has gained some 85%.

The escalating geopolitical tensions provide a challenging

backdrop to the U.S. Federal Reserve's policy decision due later

in the day. The central bank is widely anticipated to leave its

benchmark rates unchanged in the 4.25%-4.50% range.

"Fed Chair Jerome Powell has said before that the cost of

waiting (to resume cuts) is low, and that should be the mantra

over summer, hoping visibility improves on tariffs, the labour

market/wages and oil prices," analysts at Societe Generale said

in a note.

In Indonesia, the central bank paused its easing cycle and

delivered a widely expected decision to hold policy rates,

reaffirming an objective to balance currency stability with

efforts to lift economic growth.

The Indonesian rupiah pared some losses to trade 0.1%

down, while stocks extended losses, shedding 0.74%

following the rate decision.

In central Europe, the Czech crown was steady at

24.811 to the euro ahead of an interest rate decision due next

week. Prague stocks edged up 0.1%.

Hungary's main stock index extended gains to hit an

all-time high, up 0.5% a day after the parliament passed Prime

Minister Viktor Orban's 2026 election year budget that included

steep tax cuts for families.

Hungary's forint currency fell 0.4% after modest

losses in the previous session.

Poland's zloty steadied against the euro, while

the main stock index also remained stable. Data showed

Polish consumer sentiment climbed in June for a second month in

a row.

Romania's leu and stock index were little

changed.

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