Ibovespa Opens June Lower on Middle East Tension, Inflation

BRAZIL · MARKETS

Brazilian stocks began June on the back foot, with the Ibovespa down around 0.71% near 172,000 points as renewed Middle East tensions and rising domestic inflation expectations weighed on sentiment. The weak open followed a more than 6% drop in May, while the central bank’s weekly survey showed economists lifting their inflation forecast yet again.

How the Ibovespa opened the month

By around 10:40am on Monday, the Ibovespa was down about 0.71% at roughly 172,000 points, while the spot dollar was little changed, easing 0.11% to about R$5.03 ($1.00). On Friday the US currency had closed 0.24% higher at R$5.0453.

The soft start extended a difficult stretch for Brazilian equities, which ended May with a cumulative loss of more than 6%. Investors began the month focused again on diplomatic and military developments in the Middle East.

Why the Ibovespa is under pressure

Iran and the United States exchanged attacks over the weekend, contradicting a previously established ceasefire, while Israel struck southern Beirut and intensified its offensive in Lebanon. The renewed confrontation pushed oil prices higher and raised geopolitical concern.

Higher oil supported Petrobras, one of the index’s main positive contributors, while Vale weighed on the benchmark amid weakness in iron-ore futures in China. The split between the two heavyweights left the overall index lower.

What the Focus survey showed

The central bank’s weekly Focus survey of economists, released Monday morning, showed the median forecast for the benchmark IPCA inflation index in 2026 rising to 5.09% from 5.04%, the 12th consecutive weekly increase and above the 4.5% ceiling of the inflation target.

For 2027 the estimate edged up to 4.02%. The forecast for the benchmark Selic interest rate held steady at 13.25% for 2026, while the projection for the dollar at the end of 2026 slipped to R$5.16 from R$5.17, implying a slightly stronger real.

The oil and inflation link

The two stories are connected. A sustained rise in oil prices driven by Middle East conflict feeds into inflation expectations, which in turn supports the case for the central bank to keep interest rates high, a backdrop that tends to restrain equity valuations.

The persistent upward drift in the Focus inflation forecast, now above target for 2026, underlines why investors remain cautious even as the real has held relatively firm against the dollar.

The regional read

Latin America has returned to the risk radar of foreign investors, with external concerns combining with recent regional political developments to prompt a more cautious stance. For Brazil, the direction of oil prices and US monetary conditions remains central to capital flows.

This article reports market movements and survey data and is general information, not investment advice. Intraday figures can change through the session.