Global Markets Recoil From Iran-US Escalation, CHF Emerges Top Haven
Following the outbreak of armed conflict in the Middle East, global financial markets opened with high tension at the beginning of this week. The US Dollar recorded moderate strengthening but the Swiss Franc emerged as the most favored safe haven.
Military escalation over the weekend triggered sharp volatility across commodity and major currency markets on Monday (March 2). The United States, alongside Israel, launched strikes on Iran that reportedly killed Iran's Supreme Leader, Ayatollah Ali Khamenei, along with several senior officials.
In retaliation, Iran targeted US and Israeli military bases across multiple Middle Eastern countries and moved to close the Strait of Hormuz, a critical artery for global energy shipments. The disruption left around 150 oil and gas tankers stranded outside the narrow waterway, while Iran's naval forces were reported to have attacked vessels attempting to breach the blockade.
The closure of the Strait of Hormuz immediately raised serious concerns about global energy supply. Brent crude oil prices surged sharply to USD80.50 per barrel at market opening, a significant increase from Friday's closing position of USD73.68.
Jason Wong, a strategist at Bank of New Zealand, said the initial market reaction signaled a clear shift toward risk aversion. He pointed to uncertainty over the duration of the conflict, the potential for further oil price spikes, and the indefinite closure of the Strait of Hormuz as key drivers behind the defensive positioning in global markets.
US President Donald Trump told The Daily Mail that military operations against Iran were expected to last approximately four weeks. The timeline has heightened investor caution, with market participants increasingly wary of a broader regional escalation and the possibility of additional countries becoming involved.
CHF Shines as Yen, Euro, and AUD Weaken
The surge in energy prices has weighed heavily on currencies of major oil-importing economies. The Japanese Yen and the Euro both retreated, with USD/JPY rising around 0.3% while EUR/USD falling close to 0.4%.
Risk-sensitive currencies also came under pressure. The Australian Dollar slid roughly 0.6% against the greenback, while the Sterling declined about 0.5%. In contrast, USD/CHF and EUR/CHF moved lower, signaling broad-based strength in the Swiss Franc. The price action suggests that investors currently favor the Franc over the US Dollar as the primary safe-haven asset amid heightened geopolitical uncertainty.
In a research note cited by Reuters, Wells Fargo highlighted the increasingly precarious position of the Euro. The bank warned that Europe faces significant challenges ahead of the gas storage refill season, as low inventory levels may force the European Union to secure large volumes of energy at a time when prices risk surging further.