What commenced as a robust week for Argentine assets on Wall Street experienced a decline in momentum during the final two trading sessions. Most Argentine companies listed in New York experienced declines on Friday, with notable drops in Mercado Libre (-2.35%), Telecom Argentina (-1.43%), and Cresud SACIF (-1.38%). Meanwhile, the country risk index compiled by JP Morgan concluded the week at a level exceeding 418 basis points. The increase pushed it further above the 400-point floor, a key threshold that would allow the Milei administration to access international financing at lower interest rates. The development was driven not by measures taken by President Javier Milei’s administration, but by actions carried out by his closest ally, U.S. President Donald Trump.
On Friday, the United States initiated strikes on bridges in Iran, prompting Tehran to respond with attacks on a power plant and a desalination facility in Kuwait. At sea, U.S. Marines conducted a boarding operation on an oil tanker in proximity to the Strait of Hormuz, while unidentified armed individuals took control of another vessel off the coast of Yemen. Leonardo Svirky, a sales trader at broking firm Becerra Bursátil, informed that the resurgence of conflict in the Middle East is inducing considerable market volatility. “It’s very complicated. One moment it looks like things are being resolved, and the next it seems they’re not. That’s what makes it dangerous,” he said. While the majority of American Depositary Receipts are experiencing downward pressure, Argentine energy stocks are propelling the local Merval index forward. The reason is the sharp rise in Brent crude oil, the global benchmark used across much of the world, including Argentina.
The index experienced an increase exceeding 4% on Friday, culminating in a weekly gain of 15.6%, marking its most substantial weekly rise since mid-April. Migliore explained that, on one hand, the “widespread weakness” seen across international markets, particularly emerging markets, reflects a global environment of “heightened risk aversion.” Conversely, the recent surge in oil prices, spurred by the latest intensification of the conflict in the Middle East, “has renewed investor interest in local energy companies.” Pablo Lazzati stated that elevated oil prices are “particularly benefiting” energy companies such as YPF, Pampa Energía, and Vista Energy. “Expectations of higher revenues and wider profit margins are supporting these companies’ share prices,” he emphasized.
Vista Energy’s ADR rose 2.6%, YPF’s gained 2.5%, and Pampa’s advanced 0.26%. Migliore added that “this decoupling had already been evident in previous sessions of the current military escalation” when the local energy sector managed to cushion part of the losses affecting other sectors. “This global backdrop is not helping at all,” Svirky said, stressing that the recent rise in country risk is not due to any “local risk.” Lazzati, meanwhile, noted that investors in the local market continue to wait for a further decline in Argentina’s country risk. “Until that happens, it will be difficult for local stocks to stage a broader and more sustained rally,” he said.