The conflict that began at the end of February between the United States, Israel, and Iran has not been confined to the Middle East but has spread to other regions as well. This war has disrupted maritime trade and affected global supply chains. The rise in oil prices has driven inflation higher, causing volatility in world markets. During times of economic uncertainty, investors tend to withdraw from risky markets and shift their investments into comparatively safer assets, such as the US dollar. This movement has influenced currencies worldwide, with some currencies depreciating, others experiencing fluctuations, and a few strengthening.
According to André Perfetto, a Brazilian economist and head of the APCIA advisory firm, “Oil prices impact everyone… currency volatility can amplify or mitigate this effect.” The changes in currency values affect countries and their citizens differently depending on various economic factors. Countries that heavily import fuels, especially oil, have experienced the most significant impact on their currencies. Nations such as India, Indonesia, the Philippines, Thailand, and Egypt have been among the most affected.
Since the onset of the Iran war, India’s rupee has depreciated by nearly 5 percent. With rising oil prices, the rupee has repeatedly touched record lows. Central banks have responded by raising interest rates and selling dollar reserves in attempts to stabilize their currencies. Indonesia’s central bank, for example, has employed both measures. While higher interest rates benefit savers, they also increase the cost of borrowing.
Other countries have witnessed currency fluctuations, including South Africa, Colombia, Chile, and Mexico. Their currencies have oscillated with global market trends. Energy-exporting countries like Brazil and Malaysia have seen increased income from exports as oil prices rose. Financial institutions such as Goldman Sachs and Bank of America have reported strong demand for Brazilian government bonds and stocks.
China’s currency remains stable due to strict governmental regulations and policies. Since the conflict started, the Russian ruble has become the best performing currency. In developed economies, investors have traditionally favored currencies considered safe havens. However, the International Monetary Fund (IMF) has signaled that the Iran war is likely to slow economic growth and increase inflation, warning of challenging conditions ahead for the global economy.
