The United States and Israel launched strikes on Iran on Saturday, targeting its leadership and plunging the Middle East into a new conflict that President Donald Trump said would end a security threat and give Iranians a chance to topple their rulers.
The strikes put nearby oil-producing Gulf Arab countries on edge as fears of escalation grew, and Tehran responded by launching missiles towards Israel.
WILD SWINGS, EVERYWHERE
The conflict is likely to exacerbate volatility across global markets, which have already swung wildly this year owing to Trump’s tariffs and a sharp tech selloff.
The VIX volatility index (.VIX), has risen by a third this year, and implied U.S. bond volatility (.MOVE), is up 15%.
Currency markets are unlikely to be immune, analysts say.
The dollar index fell by around 1% during the June war, CBA notes. But that fall was short-lived and unwound after three or four days.
“In current circumstances, the size of the fall will depend on how large and how long-lasting the conflict is expected to be,” CBA analysts said in a note a week ago.
“If the conflict was long-lasting and disrupted oil supplies, we expect the U.S. dollar would lift against most currencies except Japanese yen and Swiss franc. The U.S. is a net energy exporter and so benefits from higher oil and gas prices that would result from disrupted oil supply.”
Israel’s shekel will almost certainly be another mover – Iran quickly retaliated against Israel on Saturday.
It dropped 5% at the start of the June war and also reacted after Israel struck Iran’s Damascus consulate in April 2024 and when Iran launched missiles at Israel that October.
All episodes were short-lived and followed by quick shekel rebounds. However, JPMorgan said it could be different this time if the conflict and a rise in market risk premia proved more persistent.
“This would especially be the case if confrontation with Iran also triggers more intensive operations against Iran’s proxies,” the Wall Street bank said.
SAFE-HAVENS DO THEIR THING
The Swiss franc , widely regarded as a safe haven in times of turmoil, is expected to face further upward pressure, creating a headache for the Swiss National Bank. It is up 3% this year against the U.S. dollar.
Investors could also make another dash for gold , which has had a record run and is up 22% so far in 2026, and into silver , which has also been on a roll.
The conflict could also add to demand for U.S. Treasuries whose yields have been falling in the past few weeks.
The outlier has been bitcoin , no longer seen as a haven. It fell 2% on Saturday and has shed more than a quarter of its value in two months.
