(Bloomberg) -- Emerging-market stocks and equities capped their longest streak of weekly losses in almost a year as the war in the Middle East roils markets, sending oil surging and fueling growing bets the US may raise interest rates this year.

A gauge tracking currencies in the developing world fell 0.2% Friday and is at its lowest level of 2026, while an index of emerging-market stocks fell as much as 1% on Friday. Assets hit fresh lows for the day late afternoon as oil prices spiked past $112 a barrel after CBS News reported the US is making “heavy” preparations for potential use of ground troops in Iran. Speaking at the White House this afternoon, Trump said he doesn’t want a ceasefire.

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US Treasuries sank amid the escalating tensions, and bond traders increased their bets on an interest-rate hike to 50% by October on concern that a protracted war in the Middle East will stoke global inflation.

“Markets are pricing more Fed hikes for this year,” said Brendan McKenna, an emerging-market strategist at Wells Fargo in New York. A worsening geopolitical backdrop “with no material signs of improvement on the horizon” is adding to the risk-off mood, he added.

Both indexes of emerging-market assets were down for a third week in a row, the longest stretch since April, when Trump’s tariff roll-out shook markets.

Meanwhile, there’s been a shift in sentiment on the US dollar, which advanced 0.5% to cap the week. Speculators turned positive on the greenback for the first time this year as the war pushes energy costs higher and supports the currency’s status as a safe haven.

A “notable run-up” in yields in developing markets have “tightened financial conditions and taken a toll on risk sentiment towards EM assets,” said Dan Pan, an economist at Standard Chartered Bank in New York.

Still, analysts at HSBC said that while the war has added a fresh layer of uncertainty, investors continue to broadly support EM assets. According to a survey from the bank, sentiment toward the region has strengthened, with the share of bullish investors reaching the highest level since January 2021.

--With assistance from Francine Lacqua, Bhaskar Dutta and Matthew Burgess.

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