* MSCI LatAm stocks tumble 4.6%, FX falls 1.3%

* Chile's peso, Mexican stocks see biggest drop since

April

* Brazil's economy cools in 2025 weighed by high interest

rates

* UAE markets to resume trading on Wednesday after

two-day pause

(Updates with late afternoon trading)

By Twesha Dikshit and Purvi Agarwal

March 3 (Reuters) - Latin American assets sank to over

one-month lows on Tuesday, extending the previous session's

selloff as an escalating Middle East conflict sent oil prices

sharply higher and revived inflation worries.

The MSCI Latin American equity index fell

4.6%, while the corresponding currency index

slid 1.3% against a stronger dollar as investors sought the U.S.

currency's safe-haven appeal.

The MSCI gauges, Chile's peso and Mexican stocks and the

peso posted their steepest one-day declines since April, when

U.S. President Donald Trump's "Liberation Day" tariffs rattled

global markets.

Oil prices soared 6% in their third session of gains, as the

war entered its fourth day. Iran respondedto the U.S. and

Israeli air war with strikes on energy infrastructure in Gulf

countries and tankers in the Strait of Hormuz, disrupting

commercial shipping.

The Strait of Hormuz carries about a fifth of the world's

oil and liquefied natural gas. A senior Iranian Revolutionary

Guards official said the waterway was closed and warned of fire

on any ship attempting to pass.

Still, equity indexes in Colombia and Mexico

, which export oil, posted declines of 1.1% and 2.9%,

respectively. The Colombian peso was down 1.5%, while

Mexico's peso dropped 2.2%.

"It (the conflict) could take weeks, it could be messy and

oil prices could jump more. These are all uncertain. So the

market starts to price in the worst scenarios," said Kathryn

Vera, chief market strategist at StoneX.

"When you have a risk-off sentiment, volatility hits the

riskiest asset classes the most."

RISK-OFF MOOD EMBROILS GLOBAL MARKETS

Brazil's benchmark stock index fell 3% and the real

weakened 2% against the dollar. Data showed Latin America's

largest economy grew 2.3% in 2025, its weakest performance since

the 2020 COVID pandemic, as high interest rates weighed on

consumption and investment.

Shell's Brazil CEO saidthe conflict could offer

Brazil an "enormous opportunity" to attract investment to

develop its oil assets.

"If things look worse for China, they're going to need more

energy from Brazil, because Venezuela and Iran were the ones

that serviced Chinese oil needs in very large amounts... it

could pick up market share," said Vera.

Still, not all EM countries will be affected equally, with

those dependent on oil imports being more vulnerable, while the

impact of the conflict could go beyond inflation to pressure

external balances and capital flows.

In Chile , copper-linked stocks fell 2.9% to an

over three-month low and the peso weakened 3% as the

risk-off mood spread in and beyond emerging markets. Argentina's

stocks pared losses to trade flat, while its currency

fell 1.5%.

The broader MSCI emerging markets index was set to lose over

5% over the previous two sessions. South African stocks,

government bonds and the rand extended declines, weighed by a

pullback in gold.

In Europe, Poland's blue-chip index closed 4.5%

lower. Stocks in Greece, a dominant force in global

shipping, slumped 5.8%.

Meanwhile, the UAE Capital Markets Authority said the

country's bourses would resume trading on Wednesday, after a

two-day suspension following Iran's strikes on the Gulf state.

Key Latin American stock indexes and currencies:

Latin American market

prices from Reuters

MSCI Emerging Markets 1523.56 -3.92

MSCI LatAm 3049.73 -4.60

Brazil Bovespa 183562.91 -3.03

Mexico IPC 68536.22 -2.9

Chile IPSA 10248.96 -2.85

Argentina Merval 2604713.8 0.06

9

Colombia COLCAP 2124.63 -1.09

Brazil real 5.2734 -1.98

Mexico peso 17.6755 -2.18

Chile peso 907.63 -2.99

Colombia peso 3795.22 -1.48

Peru sol 3.4198 -1.96

Argentina peso (interbank) 1414 -1.51

Argentina peso (parallel) 1405

-0.36