* Stocks down 0.2%, FX falls 0.3%

* Hungarian forint set for worst week in almost two years

* The war in Iran fuelled demand for Russian energy -

Kremlin

* Inflows data shows EM funds continue to attract

interest

By Twesha Dikshit

March 6 (Reuters) - Emerging market assets ticked lower

on Friday and were on track to log their biggest weekly decline

since the COVID-19 pandemic in 2020, as the Middle East conflict

unnerved markets and dampened risk appetite.

The clash between U.S.-Israel and Iran entered the seventh

day, showing no signs of slowing down as Israel carried out

heavy strikes on Hezbollah-controlled areas of Beirut on Friday,

targeting infrastructure in Tehran, while Iran struck parts of

Tel Aviv.

A shutdown of the Strait of Hormuz, responsible for over 20%

of daily global oil supplies, sent oil prices surging through

the week, stoking supply fears and inflation worries.

Within EM, markets in Asia and emerging Europe reliant on

oil imports remained vulnerable to energy shocks, while those in

Latin America fared slightly better. The Middle East conflict

also drove up demand for safe havens, strengthening the dollar

and pressuring EM currencies.

"The EM FX loser board (is) topped by Hungary's forint,

Chile's peso, South Africa's rand and then followed by quite a

few of the Latam currencies. 2.5%-4% losses against the dollar

have been seen this week," said ING's global head of markets

Chris Turner.

"Energy deficits are the driving force here, but some of the

Latam losses are more down to rising volatility hitting the

carry trade."

The MSCI index of EM equities slipped 0.2%, while

a corresponding gauge of currencies edged 0.3%

lower.

MARKETS MIXED AS IMPACT DIFFERS FOR REGIONS

Bourses in the Middle East were mixed with stocks in Dubai

, Abu Dhabi and Bahrain dropping

between 1.1% and 2.8%. Other regional shares were higher, with

Egypt's benchmark index rising 2.3%.

Turkey's benchmark index dipped 0.7% and was set

for a weekly loss of over 5%, while Bucharest's index

rose 0.7%.

Poland's blue-chip index was marginally lower, with

Hungary's and Greece's down 0.9% each.

The Polish central bank lowered rates by 25 basis points

earlier this week as widely expected despite the uncertainty

caused by the conflict. Central banker Ludwik Kotecki told local

media on Friday that the war in the Middle East meant less space

for rate cuts in Poland.

The Hungarian forint fell 1.2% against the euro

and was set for its worst week in almost two years. Other

currencies in the region also ticked lower.

Hungary said it would stop transit shipments going through

the country that are important for Ukraine as long as Russian

crude shipments are halted via the Druzhba pipeline.

The Kremlin said the war in Iran had fuelled demand for

Russian energy products, saying Russia remained a reliable

supplier of oil and gas.

Asian stocks were also mixed, a day after recovering from a

sharp selloff, with indexes in Philippines and Indonesia

down 1% and 1.6%, respectively.

The U.S. issued a 30-day waiver to allow Russian oil sale to

India, heavily dependent on crude imports, senior officials told

Reuters.

Investors said they were betting on economic fundamentals

and fragmented geopolitics to aid a year-long rally that has

seen EM assets outperform peers.

Barclays said money had continued to flow into EM funds

despite geopolitical developments with credit funds seeing the

largest weekly intake since January 2023.

Asia-focused funds saw outflows but funds investing globally

continued to attract interest, data from the bank showed.

LSEG Lipper data showed EM equity funds inflows were at an

eight-week low of $5.3 billion.

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see