iShares MSCI Brazil ETF

EWZ

Market cap $10.6B

A tentative U.S/–Iran ceasefire has reignited risk appetite across emerging markets, driving more than $1.1 billion into U.S.-listed EM ETFs and snapping a four-week streak of heavy outflows, reported Bloomberg.

The ongoing Iran war and Strait of Hormuz blockade have sharply disrupted global energy and fertilizer flows, with Brazil facing acute exposure. Brazil benefits from higher oil prices as a net exporter, but inflation and logistics costs are rising, pressuring domestic fuel and transport sectors.

I rate the iShares MSCI Brazil ETF a BUY, citing Brazil's monetary easing and favorable global trade realignment. EWZ benefits from Brazil's deepening trade ties with China and the EU, structural export growth, and a dividend yield of 4.2%. Monetary policy easing is a near-term catalyst, while the EU-Mercosur free trade agreement offers a generational export opportunity.

Brazil's benchmark Ibovespa fell about 1% on Friday, slipping below the 179,000 mark as investors recalibrated expectations in response to a more cautious tone from central banks and escalating geopolitical tensions in the Middle East. The decline reflects a broader reassessment of monetary policy trajectories, particularly as rising energy costs revive concerns about inflation.

I reiterate a Buy rating on iShares MSCI Brazil ETF (EWZ), citing robust geopolitical and domestic catalysts ahead of Brazil's 2026 election. The Donroe Doctrine's influence and potential opposition victory could drive fiscal reforms, improving Brazil's asset outlook and supporting EWZ upside. EWZ trades at 11x earnings, offering a 36% upside if re-rated to a conservative 15x multiple, with election dynamics as a key trigger.

Most U.S.-listed emerging market ETFs have spent the past year treading water or losing ground.

As investors balanced optimism over a potential de-escalation in the Middle East with ongoing geopolitical uncertainty, Brazil's benchmark Ibovespa index posted a modest gain on Tuesday, remaining above the 181,000-point threshold. However, the early optimism faded as fresh reports of targeted strikes in southern Lebanon emerged, limiting further advances in stocks.

ETFs tracking Brazil and Mexico are showing encouraging technical indicators.

Brazilian equities (EWZ, FLBR) face a nuanced bull case driven by foreign capital inflows and anticipated interest rate cuts from 15% to 10.5% by 2027. Despite a 53% BRL rally in the Ibovespa, local investors remain cautious due to persistent fiscal risks, political uncertainty, and low equity risk premiums.

This long call on EWZ gives you exposure to Brazil with less money out of pocket.