The winners and losers of the Currency Crisis from the war

Picture Credit: by BBC

Look at a map of the world's worst-performing currencies right now and a brutal pattern emerges. It is not random. It is not coincidence. It is geography and energy policy, and it is punishing millions of people who have nothing to do with the war in Iran.

Since the US-Israeli conflict with Iran closed the Strait of Hormuz, the currencies taking the heaviest hits are almost all energy importers. The Egyptian pound, the Philippine peso, the South Korean won, the Thai baht, all in freefall. On the other side of the ledger, the Brazilian real, the Nigerian naira, and the Kazakhstani tenge are rising. The difference between the winners and the losers is simple: oil.

The pain runs deeper than exchange rates. In Turkey, which imports more than 70% of its energy, foreign exchange reserves posted their biggest monthly decline on record in March. Indonesia's rupiah has weakened past the depths of the 1998 Asian financial crisis. India's state-run oil retailers are losing the equivalent of $104 million every single day, selling fuel below cost to shield consumers from prices they simply cannot absorb.

What makes this crisis uniquely dangerous is the dollar. In the 1970s oil shocks, America was an importer too, so a weaker dollar softened the blow for everyone buying crude in greenbacks. This time, with the US now the world's supplier of last resort, the dollar is strengthening. Emerging economies are not just paying more for oil. They are paying more for the dollars needed to buy it.

Indian Prime Minister Narendra Modi last weekend urged citizens to use "petrol, diesel and gas with great care", a remarkable admission of vulnerability from the world's third-largest oil importer.

There is an exit, but governments have been too slow to take it. In Indonesia and Thailand, over 30% of cars sold in February were fully electric. India's EV sales jumped 41% in April year-on-year. The demand for an alternative is undeniable. The question is whether governments will move fast enough to make this the last time an energy crisis becomes a currency crisis.