Ibovespa Drops on Oil Rally and Political Risks

The Ibovespa fell 0.9% to close at 185,501 on Monday amid a rebound in oil prices and persistent political uncertainty. Oil prices rose after Saudi Arabia shut down a crucial pipeline that bypasses the Strait of Hormuz. A diplomatic meeting between Iran and Gulf Arab states to discuss the situation in Hormuz, originally scheduled for Monday in Oman, was abruptly postponed following the pipeline attack. Renewed energy-driven inflationary pressures ahead of interest-rate decisions by the BCB and the Fed weighed on credit-sensitive stocks. Major banks posted losses, with Itaú down 0.9% and Bradesco down 1.4%. Utilities also closed lower, with Eneva losing 1.5%. Political uncertainty remained elevated amid the ongoing Supreme Court crisis, while new election polls confirmed the close race for the presidency between President Lula and Flávio Bolsonaro. Brazil’s stock-market volatility index jumped 5.24%. Vale fell 3.5% as iron ore prices in China closed lower.

The Ibovespa fell about 1% to trade below 185,500 on Monday amid a rebound in the oil rally and persistent political uncertainty. Oil prices rose after Saudi Arabia shut down a crucial pipeline that bypasses the Strait of Hormuz. Renewed energy-driven inflationary pressures ahead of interest-rate decisions by the BCB and the Fed weighed on credit-sensitive stocks. Financials were mostly lower, with Banco do Brasil down more than 1%, while Itaú, Bradesco, B3 and Caixa shed about 2% each. Utilities also moved lower, with Axia losing 2% and Sabesp falling 2.5%. Political uncertainty remained elevated amid the ongoing Supreme Court crisis, while a new Datafolha poll showed President Lula maintaining a numerical lead over Senator Flávio Bolsonaro in a potential October runoff. Vale fell near 2% as ion ore prices in China closed lower. Petobras (+1%) was the only positive highlight.

The Ibovespa fell 0.6% to close at 187,207 on Friday as the Supreme Court crisis continued to fuel political uncertainty, weighing on the country’s economic outlook. Chief Justice Edson Fachin ordered Justice André Mendonça to remove, within 24 hours, the secrecy surrounding proceedings related to investigations into Banco Master. This includes possible irregularities involving the financing of the film “Dark Horse,” which could affect Flávio Bolsonaro’s electoral prospects. Markets view Bolsonaro as more fiscally restrictive, while elevated domestic yields and weak business activity continue to weigh on the economic outlook. State-controlled financial stocks traded lower, with Banco do Brasil down 1.4%, BB Seguridade shedding 4.1%, and Caixa losing 2.4%. Utilities also posted losses, with Axia down 1.6%. CSN plunged 7.4% as investors booked profits, with the stock still up 4.2% on the week following a CEO change. The Ibovespa rose 1.1% on a weekly basis.