Ibovespa Slips as Selic Decision Looms Amid Middle East Tensions

The Ibovespa fell 0.4% to close at 179,640 on Wednesday as investors processed the Federal Reserve's hawkish hold and pivoted toward the imminent Selic rate decision. While the Fed maintained its 3.5%–3.75% range, the focus shifted to whether the Copom will implement a 0.25 pp or 0.50 pp cut amid escalating regional tensions that pushed the commercial dollar toward R$ 5.20. Rising future interest rates and government threats to block companies violating freight rate guidelines weighed on the index despite a 2.2% gain for Petrobras following new gas reserve discoveries. Resource heavy stocks remained a drag as Vale fell 2.4% on declining iron ore prices and higher shipping costs while banking majors Bradesco and Banco do Brasil dropped over 1%. As global markets grapple with the effective closure of the Strait of Hormuz, the Brazilian market reflects deep uncertainty over how local authorities will balance growth against the 0.7% surge in US producer inflation.

The Ibovespa edged below 180,500 on Wednesday as investors awaited the new Selic rate announcement, which may signal how authorities are weighing growth and inflation risks amid the Middle East conflict. Markets expect the first rate cut since May 2024, though caution is likely given escalating geopolitical tensions. Rising oil prices amid supply disruption in the region lifted inflationary pressures, raising concerns over higher bond yields and lower credit demand. Banking stocks fell, with Bradesco down 1% and Itaú down 0.6%. Also, Vale lost 1% as iron ore prices declined on higher freight rates hindering steel exports. Meanwhile, Petrobras rose 1% on higher oil prices and news of a new gas reserve discovery.

The Ibovespa cut gains from the morning to close 0.3% higher at 180,410 on Tuesday, with support from companies in the energy and utility sectors. Petrobras gained 2% on another session of gains for crude oil prices. Strikes from Iran to GCC countries continued to threaten global oil supplies, benefiting domestic producers and refiners. In the meantime, utilities gained after Sabesp reported strong Q4 2025 results and approved R$583.6 million in interest on equity for the fiscal year. In turn, banks were mostly lower ahead of the Brazilian central bank's policy decision tomorrow. The BCB is expected to start its cutting cycle, although markets are not in agreement over a 25bps and 50bps cut.