EMERGING MARKETS-EM stocks, FX slide as oil and bond yields rise amid US-Iran tensions

By Ragini Mathur

Aug 18 (Reuters) - Most emerging-market stocks and currencies fell on Tuesday as rising oil prices and a global bond selloff dented risk appetite, after the United States ruled out extending a temporary ceasefire agreement and an Iranian official said Tehran would shift to a "fully offensive" military posture.

Government borrowing costs climbed toward levels not seen in decades as the conflict in the Middle East fuelled concerns about inflation. The yield on the 30-year U.S. Treasury bond, a benchmark for global borrowing costs, rose to its highest level since June 2007. US/

Brent crude futures gained for a third straight session, hovering around $91 a barrel, adding pressure across global fixed-income markets and risk assets. O/R

Efforts to negotiate a lasting end to the conflict in the Middle East have stalled and the Strait of Hormuz, a vital global oil supply route, remains effectively blocked by Iran.

Highlighting the diplomatic tensions, U.S. President Donald Trump threatened to bomb Oman if it "gets in the way" of negotiations over the strait's future.

International bonds in the Gulf region also came under heavier pressure.

The MSCI index of emerging-market currencies .MIEM00000CUS fell 0.74% after reaching record highs in the previous session, while its equity counterpart .MSCIEF also declined 0.74%.

The dollar index =USD recovered some ground after falling for three consecutive sessions, last up 1%.

"The dollar is not quite ready to make a sustained break lower just yet," said Chris Turner, global head of markets at ING.

"The two factors providing near-term support are higher energy prices and rising 30-year Treasury yields. Both of these, should they extend, could put a September hike from the Federal Reserve back on the agenda."

Tuesday's moves marked a sharp reversal from earlier this month, when emerging-market assets had benefited from easing expectations of a near-term Fed rate hike after softer U.S. economic data. Strong technology-sector earnings had also supported sentiment.

Among Asia's major markets, South Korea's .KS11 and Taiwan's .TWII benchmarks fell 1.6% and 1.2%, respectively. The South Korean won KRW=KFTC rose 0.2% and the Malaysian ringgit MYR= firmed 0.1%, while the Taiwan dollar TWD=TP fell 0.3%.

In emerging Europe, the Hungarian forint EURHUF= and Polish zloty EURPLN= weakened 0.9% and 0.5%, respectively, against the euro. The regional stock indexes also slipped broadly.

Elsewhere, South Africa's rand ZAR=D3 fell 0.1%, while the benchmark JSE Top 40 index .JTOPI was down 0.08%.

HIGHLIGHTS:

** Zambia's Hichilema re-elected though cost-of-living pressures dent his support

** Malaysia considering consumption tax reform, PM says

** Bank Indonesia to hold rates on August 19, but leadership change raises independence concerns

For TOP NEWS across emerging markets nTOPEMRG

For CENTRAL EUROPE market report, see CEE/

For TURKISH market report, see .IS

For RUSSIAN market report, see RU/RUB

(Reporting by Ragini Mathur in Bengaluru, Editing by Timothy Heritage)

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