The war in Iran triggers global foreign exchange market turmoil. Deutsche Bank's foreign exchange volatility index reaches a new high since July last year.

Due to the escalating tensions in Iran, investors' uncertainty has increased, causing the index measuring implied volatility in the currency market to rise to its highest level in eight months. Deutsche Bank's foreign exchange volatility index reached its highest level since July last year on Friday, marking the second consecutive week of increase. Previously, the Japanese yen against the US dollar fell to its lowest level since July 2024 last week, and the Euro also dropped to its lowest level since August. With the closure of the Strait of Hormuz, oil-importing countries are being dragged down by rising oil prices, leading to increased volatility in the currency market. In addition, traders have lowered their expectations for interest rate cuts by the Federal Reserve and other central banks due to accelerated inflation expectations, further exacerbating market volatility. Moh Siong Sim, FX strategist at Oversea-Chinese Banking Corporation (OCBC) in Singapore, stated: "If energy prices remain high, the damage to European and Asian economic growth could trigger even more turbulent foreign exchange markets." The impact of the Iran war is not limited to the foreign exchange market. Last week, the volatility of US Treasury bonds (as measured by the ICE BofA MOVE index) soared to its highest level in nine months, while the VIX stock volatility index also reached its highest level since April.