* MSCI EM FX down 0.2%, stocks fall 0.6%

* Brent crude surges 3%, topping $111 a barrel

* South African stocks fall to multi-week lows on gold

weakness

* Interest rate decision due in Hungary, forint slips

By Purvi Agarwal

April 28 (Reuters) - Emerging market stocks retreated

from record highs on Tuesday while currencies faltered against a

stronger dollar as efforts to resolve the Iran conflict stalled,

bringing focus back onto the war's inflationary fallout.

MSCI's gauge of global EM equities retreated 0.6%

from a record high hit in the previous session as investors

bought into artificial intelligence enthusiasm.

On Tuesday, that optimism gave way to caution ahead of

quarterly earnings from the big U.S. tech companies that will

set the tone for AI-driven stocks.

Equities in Taiwan were flat after hitting a record

high in the previous session, while South Korea's inched

up to a fresh peak.

Equities in Poland gained 0.8% after falling for

six consecutive sessions. Romania's slid 1%.

South African stocks slumped 0.7% to a 20-day low,

tracking similar weakness in gold, one of its top exports.

Meanwhile, a U.S. official said that President Donald Trump

was unhappy with the latest Iranian proposal to end the

two-month war, dampening hopes for a resolution.

Brent crude oil futures gained 3% to over $111 per

barrel, bringing to the forefront the inflationary impact of the

conflict, which has fueled fiscal strains and disrupted trade

around the world.

Cynthia Kalasopatan Antoine, an economist at BNP Paribas,

said Central European economies showed resilience amid the oil

shock as most countries, excluding Poland, are not heavily

reliant on the Middle East for energy.

European funding provides a safety net and the countries'

public and external accounts are strong enough to absorb the

shock, she said.

This week, eyes will be on comments from U.S. Federal Reserve

policymakers for any clues on their approach to monetary policy.

An interest rate decision is due in Hungary on the day. The

forint weakened 0.6% against the euro, set for its

steepest one-day decline in over a month. Local stocks

inched up 0.3%.

Markets widely expect the central bank to hold rates steady.

"For now, the scenario of moderate easing, which prevailed

before the start of the conflict, is no longer on the cards.

However, central banks may revisit this option if inflation and

exchange rate movements remain manageable," said Kalasopatan

Antoine.

Turkey's lira was subdued against the dollar,

while South Africa's rand weakened 0.3%.

MSCI's gauge tracking EM currencies was down

0.2%.

HIGHLIGHTS:

** Thai finance ministry cuts 2026 growth forecast to 1.6%

due to Middle East war

** China prioritises energy security, tech edge as Iran war

fallout spreads

** Indonesia to remove import duties on some plastic

products and LPG for petrochemical industry

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see

(Editing by Joe Bavier)