The conflict in the Middle East triggered strong risk aversion for the second consecutive day. On Tuesday, March 3rd, the price of oil rose and global stock markets fell.

In Brazil, the climate of global panic caused the Ibovespa to plummet by 3.28% - the market value of companies listed on the B3 shrank by R$ 166.4 billion, according to a survey by the consulting firm Elos Ayta. This was the biggest drop since December 5th of last year, when the index fell by 4.3%.

The dollar closed up 1.91%, reaching R$ 5.265, driven by capital flight and the search for protection in assets considered safer, a movement that intensified the outflow of foreign currency from the country.

According to José Márcio Camargo , chief economist at Genial Investimentos – a financial group that owns a brokerage firm, private banking services, and an investment platform with over 1 million clients – the negative reaction of the last two days was expected following these events in the Middle East.

“It’s still too early to formulate consistent hypotheses about the future of the world and Brazilian economies,” Camargo tells NeoFeed . “What would be surprising and more worrying is a prolonged crisis.”

According to Camargo, the uncertainty surrounding the effects of the war is leading investors to seek safety in the United States, reversing the trend of capital inflows into Brazil from 2025 and early 2026, especially in fixed income.

The fact that the next Copom meeting is scheduled for March 18, however, may lead the Central Bank (BC) to be more cautious at the beginning of the interest rate cut cycle. Camargo states that Genial predicted a 0.50 percentage point (pp) cut in the Selic rate this March, bringing interest rates to 12% per year by the end of 2026.

“With the war, the probability of a smaller cut, of 0.25 pp for example, at the meeting on the 18th, has increased. If the crisis persists for longer, there is a possibility that the interest rate cut cycle will end in December above 12%,” says the expert.

According to him, the release of the country's GDP data – growth of only 0.1% in the fourth quarter and a consolidated 2.3% for the year – did not influence the Ibovespa's fall on Tuesday, the 3rd, as the results were expected. And the government has few tools to mitigate the impact of the external crisis.

"Since the shock is external and geopolitical, there is not much the Brazilian government can do besides avoid further fiscal expansion and safeguard the independence of the Central Bank," he says.

Read below the main excerpts from the interview:

Markets fell, both domestically and internationally, due to the joint US-Israeli offensive against Iran and the Iranian response, internationalizing the conflict in the Middle East. Was the market reaction surprising, considering there is ample oil supply?
The negative reaction of the last two days was expected after these events in the Middle East. What would be surprising and more worrying is a prolonged crisis. Therefore, it is still too early to formulate consistent hypotheses about the future of the world and Brazilian economies; it is necessary to monitor the evolution of the conflict. But the closure of the Strait of Hormuz, through which 30% of the world's crude oil passes, could push the price of a barrel, currently around US$80, to above US$100, causing pressure in the United States, where gasoline directly impacts the inflation rate. The price of gasoline in the US is unregulated and very susceptible to these crises.

"If oil rises above $100 a barrel and puts pressure on prices, the Fed may maintain a more cautious stance regarding monetary policy."

Could this affect other sectors of the American economy?
If oil rises above $100 a barrel and puts pressure on prices, the Fed may maintain a more cautious stance regarding monetary policy, which reinforces the flight to safe-haven assets and amplifies the devaluation of emerging market currencies, further fueling global pressure.

What is the biggest impact so far in Brazil, in your view?
The war and its impact on the oil market due to the closure of the Strait of Hormuz led investors to seek safety in the US, reversing the trend of 2025 and early 2026 of capital inflows into Brazil, especially in fixed income. This search for less uncertainty is typical in crises, and a devaluation of the real and capital outflows are already being observed. The Bovespa index, which had been performing well this year, is already feeling this gloomier scenario.

Could the current crisis impact the start of the Central Bank's Selic rate cut cycle?
It is still too early for the Central Bank to adopt drastic measures. The intensity and duration of the conflict will be decisive for the trajectory of the markets and the need for a monetary response. The initial reactions were negative, but the structural assessment depends on the persistence of the shock. If the rise in oil prices combined with currency devaluation persists, inflation will rise and may force the Central Bank to interrupt the cycle of Selic rate cuts sooner. The fact that the next Copom meeting will take place on the 18th increases the possibility of the Central Bank adopting a cautious stance.

José Márcio Camargo, chief economist at Genial: "There's not much the Brazilian government can do."

Would this mean not starting the cycle of cuts yet, or starting by cutting interest rates less than expected?
Our initial projection here at Genial was for a 0.50 pp cut in the Selic rate this March, bringing interest rates to 12% per year by the end of 2026. With the war, the probability of a smaller cut, of 0.25 pp for example, at the Copom meeting the week of the 18th, has increased, depending on international developments. If the external scenario remains adverse for one or two months, greater caution is likely, with the possibility of ending the interest rate cut cycle in December above 12%. But if the crisis dissipates quickly, the impact on monetary policy may be nil.

Did the announcement of Brazil's fourth-quarter GDP growth (0.1%) and the year-to-date growth of 2.3% influence today's sharp drop in the Ibovespa?
GDP stagnated in the second half of the year, with growth concentrated in the first, reflecting the intensity of monetary policy and high interest rates. There was a drop in investment and stagnation in household consumption. Despite this, the day's stock market decline was mainly attributed to the external scenario, with domestic data having little weight in this movement.

Is there any room for the government's economic team to take fiscal measures to contain the impact of the crisis abroad, should it continue?
Since the shock is external and geopolitical, there is not much the Brazilian government can do besides avoid further fiscal expansion and safeguard the Central Bank's independence in calibrating monetary policy. Government interference in monetary policy would be a significant downside risk.

Does the fact that President Donald Trump is unpredictable in his actions, causing political uncertainty in the US, tend to add a "risk premium" to American assets?
Traditionally, US assets have a “zero risk premium.” There has been a slight increase in the premium under the Trump administration, given the unpredictability and shocks, such as the tariffs and military interventions he implemented. Even so, compared to emerging markets, the perception of US security remains higher, and crises like war tend to reverse flows there.

"There has been an increase in the risk premium in the US because of Trump, but the perception of security there remains higher than in emerging countries."

Does the fact that Trump's popularity is low and he needs to create new events for the midterm elections mean more instability for the markets until the second half of the year?
Uncertainty surrounding Trump's future actions and the outcome of the war makes it difficult to price in the scenario until December. In other words, it is very difficult to anticipate the agenda and duration of the crisis. But the market adjusts positions according to signs of resolution or escalation.