Updates with afternoon trading levels

By Purvi Agarwal and Avinash P

May 4 (Reuters) - Most Latin American currencies and stocks fell on Monday as investors shied away from risky assets after a long weekend break, with no signs of de-escalation in the Middle East as oil prices surged.

Iran hit several ships in the Strait of Hormuz and set a UAE oil port ablaze, as U.S. President Donald Trump's attempt to use the U.S. Navy to free up shipping provoked the war's biggest escalation since a ceasefire was declared four weeks ago.

Earlier in the day, the U.S. military said two U.S. merchant ships had made it through the strait, without saying when. Iran denied any such crossings had taken place.

"We continue to think a diplomatic solution to this conflict remains the most likely outcome, especially with worsening approval ratings for President Trump sharpening political incentives to find a deal, in our view," said James McCann, senior economist, investment strategy at Edward Jones.

"However, the risk of a more prolonged or larger disruption to global energy markets remains important to monitor, in our view, especially with markets having rallied sharply in recent weeks."

The Latin American currencies index .MILA00000CUS hit a record high in mid-April as risk appetite increased following hopes of a de-escalation in the Iran war, while optimism on Wall Street added to investor confidence.

On Monday, however, the index was down 0.4%, as the dollar index =USD strengthened globally after declines last week linked to an apparent intervention by Japanese authorities to prop up the ailing yen.

The stocks equivalent .MILA00000PUS lost 1.48%.

Brazil's real BRL= and the Mexican peso MXN= both slipped 0.23% and 0.32%, respectively. Stocks in these countries .BVSP, .MXX also ticked lower.

Brazil relaunched a broad consumer debt relief program it first introduced in 2023, with the aim of cutting interest burdens and boosting disposable income ahead of President Luiz Inacio Lula da Silva's re-election bid in October.

According to opinion polls, the incumbent president and right-wing challenger Flavio Bolsonaro are tied in a simulated run-off ahead of the October elections.

Brazil's oil production hit a record high for the second consecutive month in March 2026, according to data from regulator ANP.

Chile's peso CLP= was down 1.48% and benchmark stock index .SPIPSA lost 1.88%, both hitting their lowest level since April 8.

Data showed Chile's economic activity declined for the third consecutive month in March, with its mining sector shrinking 6.5% on an annual basis.

Colombia's peso COP= lost 1.59% and hit its weakest level in over a month, a day after the central bank surprised markets by leaving interest rates unchanged at 11.25%, compared with expectations of a 50 basis point hike. Its stocks .COLCAP were 0.84% lower.

Equities in Argentina .MERV shed 2.23%, hovering at their lowest level in over a month. State oil company YPF YPFDm.BA was the biggest drag, down 2%.

Argentina set a 25% extraordinary discount for subsidized gas users during May, the Economy Ministry said, but hiked biofuel prices for the domestic market.

Key Latin American stock indexes and currencies

Latin American market prices from Reuters	Latest	Daily % change
MSCI Emerging Markets .MSCIEF	1645	2.72
MSCI LatAm .MILA00000PUS	3145.77	-1.48
Brazil Bovespa .BVSP	185799.99	-0.81
Mexico IPC .MXX	67245.53	-0.9
Chile IPSA .SPIPSA	10703.66	-1.88
Argentina MerVal .MERV	2769565.24	-2.23
Colombia COLCAP .COLCAP	2159.76	-0.84

Currencies	Latest	Daily % change
Brazil real BRL=	4.967	-0.23
Mexico peso MXN=	17.5027	-0.32
Chile peso CLP=	911.2	-1.48
Colombia peso COP=	3712.39	-1.59
Peru sol PEN=	3.5056	0.04
Argentina peso (interbank) ARS=RASL	1,401.5	-0.32
Argentina peso (parallel) ARSB=	1,385.0	1.07