Emerging market foreign exchange positions are being rapidly unwound as the conflict in Iran escalates, triggering stop-outs and value-at-risk breaches, according to traders. The shift comes amid surging oil prices, increased market volatility, and a flight to the U.S. Dollar.
“Any positions that people have held for the last few months – positions where they’ve actually made money – those are the ones getting cut very quickly,” said Sagar Sambrani, an executive director in the G10 FX options trading team at Nomura, as reported by Risk.net.
The disruption extends beyond currency markets, impacting global trade routes. Iran has effectively closed the Strait of Hormuz, a critical waterway for oil and other commodities, threatening massive delays in the flow of goods, NBC News reported on March 2, 2026. Approximately 20% of the world’s oil supply passes through the strait, according to Reuters.
Major shipping companies, including Maersk, MSC Group, CMA CGM, Hapag-Lloyd, COSCO, and Emirates SkyCargo, have already restricted or halted bookings through the region, anticipating significant disruptions. Ships are being diverted around the Cape of Good Hope, adding weeks to global shipping schedules and potentially collapsing “just-in-time” inventory systems, according to Mahmoud Abuwasel, managing partner at Wasel & Wasel.
The conflict is not only affecting oil shipments. Disruptions are also impacting the supply of pharmaceuticals from India, semiconductors from Asia, and fertilizers derived from Middle Eastern oil, according to the Associated Press.
Whereas the yen has historically been considered a safe-haven asset, the Financial Times reported that the current conflict has not triggered an abrupt reversal of the yen carry trade – a practice of borrowing yen cheaply to invest in higher-yielding assets elsewhere.