Currencies across several emerging and energy-importing economies have come under mounting pressure following the escalation of the US-Israeli conflict with Iran, as rising oil prices and a stronger US dollar combined to intensify financial strains across global markets.
Among the weakest-performing currencies since the outbreak of the conflict were the Egyptian pound, Philippine peso, South Korean won, and Thai baht, while currencies of major oil exporters including Brazil, Kazakhstan, and Nigeria strengthened alongside higher crude revenues.
Bloomberg’s analysis suggests that the Iran war has exposed a growing vulnerability across energy-importing emerging economies, where the simultaneous rise in oil prices and the strengthening US dollar have created mounting pressure on local currencies, foreign reserves, and government finances. While oil-exporting nations benefited from higher crude revenues, several importing economies faced renewed currency volatility as governments struggled with soaring energy import costs and increasing demand for dollars needed to finance fuel purchases. The report further noted that unlike the oil crises of the 1970s, the United States now benefits from its status as a major energy producer, reinforcing dollar strength during geopolitical instability rather than weakening it.
The crisis has effectively created what analysts describe as a “double shock” for energy-importing economies. Governments are now confronting not only higher crude prices, but also the rising cost of acquiring the US dollars required to finance imports, placing additional strain on inflation, fiscal balances, and foreign currency reserves.
Oil prices surged amid fears of disruption around the Strait of Hormuz, with Brent crude briefly climbing above $110 per barrel during the escalation as markets reacted to tightening supply concerns and growing geopolitical uncertainty.
India has already urged citizens to reduce fuel consumption to preserve foreign currency reserves, while Turkey recorded sharp reserve declines amid its heavy reliance on imported energy. Indonesia’s rupiah also fell below levels seen during the 1998 Asian financial crisis, reflecting mounting investor concerns over external vulnerabilities and rising import costs.
Analysts warn that prolonged pressure from elevated oil prices and a stronger dollar could deepen inflationary risks, widen fiscal deficits, and accelerate capital outflows from vulnerable emerging markets in the short term.
Over the longer term, however, the crisis may accelerate investment in renewable energy, electric vehicles, and domestic energy diversification strategies as governments seek to reduce exposure to recurring oil and currency shocks. Bloomberg noted that electric vehicle adoption has already accelerated in countries such as Thailand, Indonesia, and India amid rising fuel costs and growing concerns over energy security.
