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Dollar strengthens against the won following Iran attacks as markets brace for further shock waves

Published: 03 Mar. 2026, 19:09

An electronic board at a currency exchange office in Myeongdong, central Seoul, displays the dollar-won exchange rate on March 3, as the currency surged amid escalating tensions in the Middle East. [NEWS1]

The outbreak of full-scale hostilities between the United States and Iran sent shock waves through Korea’s foreign exchange market, pushing the dollar sharply higher against the won.

The dollar-won exchange rate jumped more than 20 won in a single session, climbing into the 1,460-won range. How high it goes next will depend on whether the war escalates further. Market participants see the psychologically important 1,480-won level as the first major threshold, with some warning that a breach could bring 1,500 won into view.

On Tuesday, the won closed daytime trading at 1,466.1 per dollar in Seoul, a depreciation of 26.4 won from the previous session. After opening at 1,462.3 won, the currency weakened to 1,467.8 won during intraday trading — its weakest level since Feb. 9, when it was 1,468.3 won.

The daily depreciation was the steepest since April 7 last year, when the currency fell by 33.7 won amid U.S. tariff shocks. Following the 13.9-won depression from the previous trading day, which was Friday, the won has waned 40.3 won over the past two trading days, standing out among major currencies for its volatility.

An electronic board at a currency exchange office at Incheon International Airport displays the dollar-won exchange rate on March 2. [NEWS1]

The turmoil followed a classic “risk-off” pattern. Investors reduced exposure to risk assets and moved into safe-haven assets such as the dollar. On the New York Mercantile Exchange, April West Texas Intermediate crude futures surged $4.21, or 6.28 percent, to $71.23 per barrel. The dollar index rose 1.01 percent to 98.71. The simultaneous spike in oil prices and dollar strength added pressure on the won.

Rising oil prices also stoked short-term inflation concerns and dampened expectations for U.S. interest rate cuts. According to a report by the Bank of Korea’s New York office, the probability of a rate cut in the first half of the year implied by federal funds futures fell to 50.3 percent from 63.7 percent the previous session, a drop of 13.4 percentage points. Market expectations for total rate cuts this year narrowed to 0.51 percentage points from 0.61 percentage points. As rate-cut expectations weakened, the dollar strengthened further, directly weighing on the won.

Market attention is now focused on whether the exchange rate will break past 1,480 won to the dollar — widely viewed as a psychological resistance level — and test 1,500 won. While 1,480 won is seen as a potential trigger point for authorities’ intervention, 1,500 won is regarded as a range where market fear could intensify.

A currency trader watches monitors near a screen showing the Kospi, top center, and the foreign exchange rate between the U.S. dollar and Korean won, top left, at the foreign exchange dealing room of the Hana Bank headquarters in central Seoul, on March 3. [AP/YONHAP]

KB Kookmin Bank said in a report that the dollar-won exchange rate could move within 1,430 to 1,470 won if tensions ease quickly, 1,470 to 1,500 won if clashes persist for several weeks, and 1,490 to 1,540 won in the event of escalation, such as attacks on oil refineries.

Oil prices remain a key variable, particularly after Iran moved to block the Strait of Hormuz, through which roughly 20 percent of global oil shipments pass.

“As Korea is a net energy importer, sustained increases in oil prices would inevitably weigh on both the trade balance and inflation, adding cumulative depreciation pressure on the won,” a foreign exchange market official said. Hyundai Motor Securities projected that if oil prices surge above $100 per barrel, the dollar-won exchange rate could attempt to break above the 1,500 level.

An aerial view of Port of Fujairah, United Arab Emirates, in the Strait of Hormuz, on Dec. 10, 2023. [REUTERS/YONHAP]

Some analysts, however, expect the conflict to be contained. Daishin Securities said in a report that its base-case scenario assumes the situation will be resolved within a month. Park Sang-hyun, an analyst at iM Securities, noted that with U.S. midterm elections approaching in November, a sharp rise in oil prices and renewed inflation could become a domestic political burden for Washington.

The Korean government and the Bank of Korea have begun monitoring the situation closely. The government convened an emergency meeting of relevant agencies to review market stabilization measures, while the central bank launched a 24-hour task force led by Gov. Rhee Chang-yong to track developments related to the Middle East crisis.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KIM WON [[email protected]]