Currency
How the Strait of Hormuz Crisis Impacts Forex:
US–Iran Tensions and Currency Markets Analysed
Gary Chung（FinKit Editor-in-Chief） · Published：June 23, 2026
US–Iran tensions are flaring again in 2026. Every day, 21% of the world's oil passes through the Strait of Hormuz. If things go wrong, how would surging oil prices cascade through USD, JPY, CAD, and CNY? How should Hong Kong investors position themselves? A full analysis.
The Strait of Hormuz: The World's Oil Choke Point
The Strait of Hormuz is the narrow waterway connecting the Persian Gulf to the Gulf of Oman, situated between Iran and Oman. At its narrowest point it is just 33 km wide.
Key Numbers
Daily Oil Throughput
~20 million barrels
Share of Global Oil Trade
~21%
Share of Global LNG Trade
~25%
Narrowest Point
33 km
Major Exporters
Saudi Arabia, Iraq, Kuwait, UAE
Major Importers
China, Japan, India, South Korea
If the Strait of Hormuz were blockaded, the global oil supply chain would snap instantly. The knock-on effects of surging oil prices would spread rapidly into currency markets.
US–Iran Conflict: The 2025–2026 Escalation
The US–Iran standoff has deep roots, but the last two years have seen a sharp escalation:
📌 Nuclear Deal Collapses Completely
Iran's uranium enrichment has reached 84% purity (close to weapons-grade 90%). The IAEA has repeatedly reported Iranian non-compliance. The US has tightened sanctions on Iranian oil exports.
📌 Red Sea Shipping Under Threat
Iran-backed Houthi forces continue to attack commercial vessels in the Red Sea, disrupting global shipping routes. Some shipping companies have been forced to reroute around Africa's Cape of Good Hope, sending freight costs soaring.
📌 Proxy Conflicts Escalate
Through proxies — Hezbollah, the Houthis, Iraqi militias — Iran is applying simultaneous pressure across multiple Middle Eastern fronts against the US and its allies.
📌 Oil Sanctions and Countermeasures
The US is tightening sanctions on Iranian oil exports (targeting zero). Iran has threatened to blockade the Strait of Hormuz in retaliation. Military deployments on both sides continue to ramp up.
Why Do Chinese Oil Tankers Still Sail Through?
Many analysts paint with a broad brush — "oil up → CNY down". But the reality is far more nuanced. In a Hormuz crisis, China actually enjoys several unique advantages:
🇨🇳 Iran's Largest Oil Buyer — at a Discount
US sanctions have shut Iran out of Western markets, forcing it to sell to China at a discount. China imports roughly 1 million barrels per day of Iranian oil — at below-market prices. For China, sanctions are a "discount opportunity", not a supply crisis.
🛡️ Chinese Tankers Are Not Targets
Iran and China enjoy friendly relations. Houthi forces and Iranian proxies do not target Chinese vessels. Chinese tankers sail through the Strait of Hormuz and the Red Sea unimpeded — and arguably more safely than Western tankers. Some international shipping companies have even begun chartering Chinese-flagged tankers to reduce risk.
🏦 PBOC Tightly Manages the Exchange Rate
The CNY is not a fully free-floating currency. Through the central parity rate mechanism, the counter-cyclical factor, and offshore market intervention, the People's Bank of China effectively limits depreciation. Even when oil prices spike, the CNY typically falls less than other emerging-market currencies.
💰 Asian Capital Inflows — CNY as a Relative Safe Haven
Middle East turmoil drives some capital from Europe and the Middle East toward Asia. With its large economy and political stability, China — and the CNY — becomes a parking spot for regional capital. For Middle Eastern sovereign wealth funds diversifying away from the USD, the CNY is a top choice.
💡 Key takeaway: In a Hormuz crisis, the CNY is not a "victim" in the traditional sense. Iranian discounted oil + safe passage for Chinese tankers + PBOC management = the CNY often holds up well, even outperforming some Asian peers.
How Each Currency Moves in a Crisis
When the Strait of Hormuz is threatened, global capital rapidly reprices risk. Here is the expected direction for each major currency:
| Currency | Direction | Reason |
|---|---|---|
| US Dollar (USD) | ↑ Strengthens | Global safe-haven flows pour into USD assets (Treasuries). During turmoil, the dollar benefits as the world's reserve currency. |
| Japanese Yen (JPY) | ↑ Strengthens | A traditional safe haven. Japan is an oil importer, but yen carry-trade unwinding drives repatriation flows that push the yen higher. |
| Swiss Franc (CHF) | ↑ Strengthens | The ultimate safe haven. Switzerland's political neutrality and fiscal prudence make it the top parking spot during global crises. |
| Canadian Dollar (CAD) | ↑ Strengthens | Canada is a major oil producer. Oil surges → CAD benefits. Same logic applies to AUD and NOK. |
| Chinese Yuan (CNY) | → Resilient | Discounted Iranian oil (~1M bbl/day), unimpeded Chinese tankers, PBOC rate management, and Asian capital inflows. The CNY often outperforms other EM currencies in a crisis. |
| Hong Kong Dollar (HKD) | → Stable | HKD is pegged to USD (7.75–7.85 linked exchange rate). A strong USD means a strong HKD. The HKMA intervenes to maintain the band. |
| Indian Rupee (INR) | ↓ Weakens | India is heavily dependent on imported oil (~85%). Oil up → current account deficit widens → INR under pressure. |
| Euro (EUR) | ↓ Weakens | The EU is also dependent on imported energy. Geopolitical conflict on Europe's periphery → capital flees to USD, leaving EUR behind. |
Historical Precedent: How Markets Reacted Last Time
2019: Tanker Attacks + US Drone Shot Down
In June 2019, two tankers were attacked in the Gulf of Oman, followed by Iran shooting down a US drone. The US and Iran came close to open conflict. Market reaction:
▸Brent crude: spiked 4% in a single day, rose from US$60 to US$73 (+22% in three weeks)
▸US Dollar Index (DXY): rose from 96.5 to 98.3 (+1.9%)
▸USD/JPY: fell from 108.5 to 106.8 (JPY strengthened 1.6%)
▸USD/CAD: fell from 1.338 to 1.315 (CAD strengthened 1.7%)
▸USD/CNH: edged from 6.90 to 6.93 — far less than other EM currencies (clear CNY resilience)
2024: Red Sea Houthi Attacks
In early 2024, Iran-backed Houthi forces launched large-scale attacks on commercial vessels in the Red Sea, throwing global shipping into chaos. But notably — Chinese vessels were largely unaffected:
▸Shanghai Containerised Freight Index (SCFI): surged 80% in one month
▸Brent crude: rose from US$77 to US$84 (+9%)
▸Chinese tankers continued to transit the Red Sea normally; shipping cost impact far below Western carriers
▸USD/CNH: moved from 7.12 to 7.22 (only 1.4%, well below market panic expectations)
How Should Hong Kong Investors Position?
Geopolitical risk isn't a question of "if" but "when" and "how to prepare". Here are five actionable strategies:
Strategy 1: Diversify Across Currencies
Don't hold everything in HKD or CNY. Consider allocating 10–20% to safe-haven currencies (USD, JPY, CHF) to hedge geopolitical risk. USD money market funds (e.g. USD fixed deposits or short-dated Treasury ETFs) are the simplest entry point.
Strategy 2: Hold Some Commodity Currencies
CAD and AUD are commodity currencies — they benefit when oil and metal prices rise. Access them via foreign-currency fixed deposits or ETFs as a natural hedge against an oil crisis.
Strategy 3: Don't Underestimate CNY Resilience
The knee-jerk assumption is "crisis → yuan falls", but historical data says otherwise. Discounted Iranian oil, safe Chinese tanker passage, and PBOC management mean the CNY often outperforms expectations. Holding CNY assets can actually pay off.
Strategy 4: Watch HKD Peg Risk
The HKD is pegged to the USD — safe in the short term. But in an extreme scenario (e.g. oil sustained above US$150), Hong Kong inflation would spike (all oil is imported), eroding HKD purchasing power. Holding some foreign-currency assets gives you an extra layer of protection.
Strategy 5: Model Scenarios with FinKit Tools
Use FinKit's currency calculator to model returns under different exchange-rate scenarios. If USD/HKD moves from 7.80 to 7.85, how much more would your USD holdings earn? Let data drive your decisions — don't rely on guesswork.
Summary: Geopolitics Is Forex's Invisible Driver
The Strait of Hormuz crisis isn't just Middle East news — it directly affects the value of the foreign currencies in your bank account. But at the same time, different countries are in entirely different positions; one-size-fits-all analysis is often misleading.
📊 One-Minute Summary
🛢️ Oil up → CAD, AUD up; INR down
🏃 Risk-off → USD, JPY, CHF up
🇨🇳 CNY: discounted Iranian oil + safe tanker passage + PBOC management → often resilient; don't blindly short
🇭🇰 HKD pegged to USD → stable short term, but inflation erodes purchasing power
🧩 Strategy: diversify currencies + understand country-specific dynamics + don't panic-sell + let data drive decisions