Euro, dollar, Swiss franc, yen: currencies react to the war in Iran, while inflation threatens Europe.

In Frankfurt, the European Central Bank (ECB) says it stands ready to “act quickly”. As the war in Iran restores the US dollar’s appeal as a safe haven, renewed inflation risks are emerging as commodity prices climb.

The conflict, launched on Saturday 28 February by the United States and Israel, jolted foreign-exchange markets on Monday 2 March. With a confrontation that could destabilise the wider Middle East-and disrupt the flow of goods and raw materials through the Strait of Hormuz-the dollar regained its status as the preferred refuge, outperforming even the Swiss franc and the Japanese yen.

The greenback rose by 0.85% against the yen and by 1% against the Swiss franc, reaching 157.37 yen and 0.7774 francs respectively. Against the world’s leading currency, the euro slipped by 0.9% to $1.170, while sterling fell by 0.66% to $1.3397.

The Swiss franc faces “excessive” appreciation

Against the Swiss franc, the euro was trading at its weakest levels since 2015. It dropped a further 0.5% on Monday 2 March to 0.9032 francs before later recovering, rising 0.2% to 0.9105 francs. In response, the Swiss National Bank (SNB) signalled that it intends to push back against what it considers “excessive” franc strength, warning that an overly expensive currency could seriously harm Swiss exports by making them too costly for overseas customers.

“In view of developments in the international situation, our willingness to intervene in the foreign-exchange market has increased,” the central bank said in a statement. It added: “We are prepared to intervene in the foreign-exchange market to counter a rapid and excessive appreciation of the Swiss franc, which endangers price stability in Switzerland.”

For the United Kingdom, the moves highlight how quickly global shocks can feed through to exchange rates and imported costs. A weaker pound against the dollar typically makes dollar-priced commodities-particularly oil-more expensive for UK firms and households, even when the physical supply situation has not changed domestically.

Another fault line is energy. If shipping lanes around the Strait of Hormuz are threatened, traders often price in a risk premium, pushing up crude oil and gas prices. That kind of increase can filter into transport, food production and manufacturing, raising the risk that inflation pressures return even as central banks had been hoping for calmer conditions.

Inflation: the ECB is ready to “act quickly” on interest-rate rises

At the same time, the inflation backdrop could reinforce the dollar further. Higher commodity prices linked to the Middle East may lift US inflation expectations, and in Washington the Federal Reserve could find itself facing a renewed surge in the dollar-particularly if confidence in other currencies weakens.

Energy markets are central to that dynamic. The United States remains a net exporter, unlike Europe and Japan, which rely heavily on imports. That difference can make the dollar look comparatively more resilient when oil and gas prices rise, because higher energy costs can weigh more directly on import-dependent economies.

In Frankfurt, the ECB’s leadership has said it is prepared to “act quickly” if inflation risks return. Behind the message lies a readiness to regain control of interest rates, which had been gradually reduced during 2024 and 2025 as inflation eased following the war in Ukraine. That earlier loosening was viewed as necessary to support growth-but it could be challenged again if borrowing costs need to rise in response to the US operation “Epic Fury” in Iran.