Safe-haven currencies climb as Iran crisis rattles global markets

Monday 02 March 2026 - 10:23

By: Dakir Madiha

Safe-haven currencies climb as Iran crisis rattles global markets

Safe-haven currencies strengthened at the start of the week as investors reacted to a sharp escalation in the conflict between Iran, the United States and Israel, driving money out of risk assets and into traditional shelters. The Swiss franc rose to its strongest level against the euro since 2015, while the Japanese yen also firmed as foreign exchange trading reopened after weekend strikes that killed Iran’s Supreme Leader Ayatollah Ali Khamenei and deepened fears of a wider Middle East war. The euro slipped around a third of a percent to 1.1776 dollars and fell by about half a percent against the franc to 0.9039, while typically risk-sensitive currencies such as the Australian dollar and British pound lost more than 0.5 percent. China’s offshore yuan weakened by roughly 0.2 percent as traders assessed the risk of supply disruptions facing the world’s largest buyer of Iranian crude.

The dollar posted mixed moves, gaining ground against risk currencies but softening against classic safe havens as markets repriced geopolitical risk. It advanced versus the euro, sterling and the Australian dollar, yet edged lower against the franc and the yen, which tend to outperform when political and security tensions flare. The yen’s early gains were capped by concern over Japan’s heavy reliance on imported energy at a time of surging crude prices, leaving the Japanese currency only slightly weaker against the dollar by late morning trade. Analysts at Commonwealth Bank of Australia had warned ahead of the recent strikes that a prolonged supply shock and sustained closure risks in key shipping lanes would likely push the dollar higher against most peers, with the notable exceptions of the yen and the franc. Oil prices jumped close to double digits in early trading as nearly 150 tankers dropped anchor near the Strait of Hormuz, underscoring the scale of the disruption to seaborne energy flows.

Strategists said the latest wave of volatility highlighted how difficult it is to forecast currency moves when both energy supplies and regional security are in flux. BNZ strategist Jason Wong described the immediate market reaction as a modest shift away from risk, stressing that no one can reliably predict how long elevated oil prices will persist or how extended any closure of the Strait of Hormuz might be. Analysts at Wells Fargo flagged the euro as particularly exposed because Europe must rebuild natural gas inventories from relatively low levels just as energy costs look set to rise, leaving the single currency vulnerable to further weakness if prices climb or supplies tighten.

In the region itself, foreign exchange markets delivered a split verdict on local currencies. The Israeli shekel stayed within a tight band of 3.09 to 3.14 per dollar, supported by the country’s economic fundamentals and sizeable foreign exchange reserves, even as security risks remained high. Iran’s rial, by contrast, tumbled on the open market to a record low near 1.75 million per dollar, extending a steep slide that has seen the currency lose close to 30 percent of its value since the beginning of 2026 amid sanctions, inflation and mounting political uncertainty.