Most Asian currencies strengthened, led by MYR, THB and TWD, after Iran proposed reopening the Strait of Hormuz. The proposal includes conditions such as delaying nuclear talks, and it is unclear whether the US will accept them.
Equities are near record highs, but oil prices remain elevated. Energy price pass-through linked to Hormuz remains constrained, which may weigh on demand if oil stays high for longer.
Oil Market Risks And Currency Sensitivity
A prolonged US–Iran standoff could tighten the oil market and push oil prices higher. This may limit the recovery in Asian currencies, mainly those that are high-beta and sensitive to oil.
Currency moves may vary as geopolitical developments change and as oil prices move. Differences may also reflect oil exposure, current account positions, foreign flow patterns, and central bank policy responses.
Under a scenario of unresolved tensions and elevated oil prices, PHP and THB may remain under pressure. SGD and MYR are expected to be more resilient.
We have seen most Asian currencies gain some ground recently, with the Malaysian ringgit and Thai baht firming up. This positive move is tied to Iran’s proposal to reopen the Strait of Hormuz, but a US agreement is far from certain. This situation creates significant uncertainty, which means traders should be prepared for potential sharp moves in the coming weeks.
Trading Implications And Relative Value Ideas
The main risk is that oil prices remain elevated, which could harm economic demand and reverse the recent currency gains. We remember the supply shocks in the fourth quarter of 2025 when Brent crude briefly topped $115 per barrel, and with it currently holding above $95, the risk to the global economy is very real. The longer this standoff continues, the greater the pressure on oil prices and, in turn, on oil-importing Asian nations.
This uncertainty suggests that options strategies that profit from large price swings could be valuable. We are looking at increased volatility in pairs like USD/THB, as any news of either de-escalation or further conflict could trigger a rapid move. Traders should consider positions that benefit from a breakout in either direction until the geopolitical situation becomes clearer.
We see a clear divergence emerging, creating opportunities for pair trades. A strategy of being long the Malaysian ringgit against the Thai baht (long MYR/THB) appears attractive. This position benefits from Malaysia’s status as a net oil exporter, which saw its trade surplus widen by 5% in the first quarter of 2026, while Thailand struggles with its significant energy import bill.
The Philippine peso also faces similar headwinds, making short positions in PHP attractive against a resilient currency like the Singapore dollar. The Philippines’ heavy reliance on imported oil is fueling inflation, which we saw accelerate to 4.8% last month. This pressure limits the central bank’s policy options and weighs heavily on the currency’s outlook.
