Argentine Markets Trade Cautiously as Middle East Tensions Rise; Merval Falls 1.3%

BUENOS AIRES, June 5, 2026 (Reuters) — Argentine financial markets turned cautious on Friday, with investors focused on renewed Middle East tensions that threaten a potential U.S.-Iran peace accord. Iran reaffirmed support for Hezbollah and demanded Israel withdraw from southern Lebanon, delaying a U.S.-brokered deal. The S&P Merval index fell 1.32% to 1,435 GMT, erasing a 0.33% gain the previous session. Over-the-counter sovereign bonds edged up an average 0.1%, but slipped 0.2% for the week. The central bank’s market expectations survey (REM) showed economists forecast May inflation at 2.3% and 2026 inflation at 30.5%. Twelve-month inflation expectations dropped to 23.3%, signaling a more favorable outlook for early 2027. The survey also projected a $20.185 billion trade surplus, driven by export growth. The country risk gauge measured by J.P. Morgan stood at 492 basis points, near a multi-year low of 481 hit on January 28. The interbank peso weakened 0.35% to 1,442.5 per dollar.