Most Asian currencies declined sharply on Monday during the first trading session after the United States and Israel carried out large-scale strikes on Iran. The escalation triggered a global risk-off move, prompting investors to shift funds into safe-haven assets.
The South Korean won recorded the biggest losses in the region. Traders remain concerned about South Korea’s strong dependence on imported energy and its exposure to rising oil prices, which makes the currency particularly sensitive to supply shocks.
The US Dollar Index climbed 0.2% in Asian trading after surging earlier on increased safe-haven demand. US Dollar Index futures also advanced 0.2% as of 22:45 ET (03:45 GMT), reflecting continued demand for the greenback.
US-Israel Strikes on Iran Push Oil Prices Higher
Over the weekend, the United States and Israel launched military strikes on Iran, reportedly killing Supreme Leader Ali Khamenei. Iran responded with missile and drone attacks targeting U.S. and Israeli positions across the Gulf and the broader Middle East, raising fears of a wider regional conflict.
Tensions intensified further after Israel conducted another round of strikes on Tehran on Sunday, followed by additional missile barrages from Iran.
U.S. President Donald Trump stated that operations would continue “for as long as necessary,” reinforcing concerns about a prolonged conflict and increasing uncertainty across global markets.
Oil prices surged to multi-month highs amid fears of supply disruptions in the Gulf and potential threats to shipping through the Strait of Hormuz, a key route for global crude exports. The sharp rise in energy costs weighed heavily on Asian currencies, especially those of net oil-importing economies.
According to MUFG analyst Michael Wan, currencies such as the South Korean won (KRW), Indian rupee (INR), and Philippine peso (PHP) are particularly vulnerable in a scenario of sustained oil price increases due to their reliance on oil imports and, in the case of the won, its higher beta characteristics. The USD/KRW pair jumped 1%, highlighting the pressure on the Korean currency.
Mixed Performance Across Asian Currencies
Elsewhere in Asia, currency movements were more moderate. The Indian rupee (USD/INR) rose 0.3%, while the Singapore dollar (USD/SGD) gained 0.2%. The Japanese yen (USD/JPY) edged up 0.2%, with safe-haven demand helping to limit volatility.
The Chinese yuan also showed modest gains. The onshore USD/CNY pair increased 0.2%, while the offshore USD/CNH rose 0.1%. Both remained slightly above the 34-month lows reached last week.
In contrast, the Australian and New Zealand dollars managed to recover most of their earlier losses. The Australian dollar (AUD/USD) traded flat after initially falling as much as 1.2%, while the New Zealand dollar (NZD/USD) clawed back nearly its entire 1% decline. Australia’s status as a major commodity exporter helped cushion the impact of higher oil prices compared to other Asian economies.
