* Chile's economic activity declines for third month in March

* Brazil re-launches consumer debt relief program

* MSCI LatAm FX fall 0.4%, stocks fall 1.48%

(Updates with afternoon trading levels)

By Purvi Agarwal and Avinash P

May 4 (Reuters) - Most Latin American currencies and stocks fell on Monday as investors

shied away from risky assets after a long weekend break, with no signs of de-escalation in the

Middle East as oil prices surged.

Iran hit several shipsin the Strait of Hormuz and set a UAE oil port ablaze, as U.S.

President Donald Trump's attempt to use the U.S. Navy to free up shipping provoked the war's

biggest escalation since a ceasefire was declared four weeks ago.

Earlier in the day, the U.S. military said two U.S. merchant ships had made it through the

strait, without saying when. Iran denied any such crossings had taken place.

"We continue to think a diplomatic solution to this conflict remains the most likely

outcome, especially with worsening approval ratings for President Trump sharpening political

incentives to find a deal, in our view," said James McCann, senior economist, investment

strategy at Edward Jones.

"However, the risk of a more prolonged or larger disruption to global energy markets remains

important to monitor, in our view, especially with markets having rallied sharply in recent

weeks."

The Latin American currencies index hit a record high in mid-April as risk

appetite increased following hopes of a de-escalation in the Iran war, while optimism on Wall

Street added to investor confidence.

On Monday, however, the index was down 0.4%, as the dollar index strengthened

globally after declines last week linked to an apparent intervention by Japanese authorities to

prop up the ailing yen.

The stocks equivalent lost 1.48%.

Brazil's real and the Mexican peso both slipped 0.23% and 0.32%, respectively.

Stocks in these countries also ticked lower.

Brazil relaunched a broad consumer debt relief programit first introduced in 2023, with the

aim of cutting interest burdens and boosting disposable income ahead of President Luiz Inacio

Lula da Silva's re-election bid in October.

According to opinion polls, the incumbent president and right-wing challenger Flavio

Bolsonaro are tied in a simulated run-off ahead of the October elections.

Brazil's oil production hit a record highfor the second consecutive month in March 2026,

according to data from regulator ANP.

Chile's peso was down 1.48% and benchmark stock index lost 1.88%, both

hitting their lowest level since April 8.

Data showed Chile's economic activity declined for the third consecutive month in March,

with its mining sector shrinking 6.5% on an annual basis.

Colombia's peso lost 1.59% and hit its weakest level in over a month, a day after the

central bank surprised markets byleaving interest rates unchanged at 11.25%, compared with

expectations of a 50 basis point hike. Its stocks were 0.84% lower.

Equities in Argentina shed 2.23%, hovering at their lowest level in over a month.

State oil company YPF was the biggest drag, down 2%.

Argentina set a 25% extraordinary discount for subsidized gas users during May, the Economy

Ministry said, but hiked biofuel prices for the domestic market.

Key Latin American stock indexes and currencies

Latin American market Latest Daily % change

prices from Reuters

1645 2.72

MSCI Emerging Markets

MSCI LatAm 3145.77 -1.48

Brazil Bovespa 185799.99 -0.81

Mexico IPC 67245.53 -0.9

Chile IPSA 10703.66 -1.88

Argentina MerVal 2769565.24 -2.23

Colombia COLCAP 2159.76 -0.84

Currencies Latest Daily

%

change

Brazil real 4.967 -0.23

Mexico peso 17.5027 -0.32

Chile peso 911.2 -1.48

Colombia peso 3712.39 -1.59

Peru sol 3.5056 0.04

Argentina 1,401.5 -0.32

peso

(interbank)

Argentina 1,385.0 1.07

peso

(parallel)