LONDON Nov 25 Turkey's stock market surged 1.6 percent on Monday after Iran sealed a historic nuclear deal with the West read as reducing political risk in the oil-producing Middle East and opening the door to more trade with one of the region's biggest countries.
While emerging markets were generally firmer, political tensions weighed on Thai and Ukrainian assets, and oil's 3 percent dip pushed the Russian rouble lower.
But for most companies the fall in oil prices represents a cut in costs that should support their bottom lines and may aid economic growth across the developing world.
The deal will give Iran relief from crippling economic sanctions, opening the door for exports to Tehran.
The bulk of the restrictions on Iran's own oil exports and investment in oil remain in place, but traders said it would at least be easier for it to ship to existing customers with the prospect of a freeing up of supplies if progress in relations continues.
Turkish stocks soared to three-week highs while the lira currency rose 0.5 percent and Turkish dollar bond yield spreads over Treasuries dived by 10 basis points, outperforming the broader bond index.
"The biggest beneficiary by far is the Turkish lira and not just because of the amount of oil that it imports, but also it's the most geographically close country to Iran and also the most politically exposed to the situation," said Abbas Ameli-Renani, a strategist at RBS.
Oil is the biggest contributor to Turkey's current account deficit of over $50 billion and a $10 fall in oil prices cuts the energy trade deficit by up to $5 billion.
Earlier in oil importing Asia, Indian shares rallied 2 percent, while Seoul and Taipei markets jumped 0.5-1.0 percent . The rupee firmed 0.5 percent
Israeli stocks were flat after hitting a record high after the deal on Sunday, buoyed by hopes of an easing in tensions in the region generally and shrugging off local politicians' concerns..
The shekel rose ahead of a central bank meeting which is expected to keep interest rates steady. But the bank could signal more intervention to weaken the shekel which has bucked the weaker emerging markets trend to gain 5 percent
NOT ALL ROSY
While emerging equities overall rose 0.5 percent, currencies were mostly flat, reflecting the view that the U.S. Federal Reserve and its plans to unwind economic stimulus will remain the main driver.
Gulf markets were flat, as investors weighed the prospect of lower oil revenues for the region's other major producers. Saudi stocks slid while even Dubai, which could benefit from a rise in Iranian business, slipped.
Weaker oil prices also curbed equity gains in Russia and pushed the rouble 0.4 percent lower .
An oil price fall, while positive for economies such as China, India, South Africa and Turkey, may not significantly change the picture of slowing growth in many of the sector's biggest economies.
The prospect of less Fed bond-buying, or "tapering" in the market jargon, has rocked the sector over the past six months and the risk of a cut in the flow of cheap dollars into the developing world as soon as December is weighing on traders.
"After the U.S. debt ceiling saga was finished, people effectively withdrew the possibility of a December tapering. Almost the entire consensus had shifted to March, but in the last week or two there have been whispers about the possibility of a December taper," Ameli-Renani of RBS said.
The other dampener is politics, with the Thai baht at 11-week lows after more than 1000 protesters occupied the finance ministry and 30,000 people marched to topple the government. Thai stocks also touched 11-week lows, falling 1 percent at one point.
In emerging Europe, tens of thousands people rallied in Kiev against the government's U-turn away from Europe and back towards Russia.
But yields on the dollar bond of Ukraine's state oil firm Naftogaz stayed near three-week lows < UA045920712=> around 16 percent and has slipped more than 4 percentage points from mid-November highs, reflecting belief that closer ties with Russia would help the country avert near-term default.
Societe Generale advised buying Ukraine's 2017 dollar bond.
"Although (the move away from Europe) arguably damages the long-term prospects of the country, the credit risk has considerably been reduced," the bank said.
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