Key Takeaways
The euro dropped below the 1.1650 mark against the US dollar for the first time in three weeks, as escalating geopolitical tensions between the United States and Iran triggered a broad flight to safety that lifted demand for haven assets.
"The global context is that since President Trump returned to office, we have seen different conflicts emerging," Professor Patrick Asuming, an economics lecturer at the University of Ghana, said on May 25. "These developments bring disturbances to the global economy, and Ghana is not exempt from the effects."
The currency move was part of a wider risk-off sentiment that saw investors shed exposure to economies most vulnerable to the conflict's fallout. India's finance minister on Monday flagged "fuel, fertiliser and forex" as three key areas of concern, after a fourth hike in CNG prices in two weeks. In West Africa, the Ghanaian cedi has come under pressure from a stronger dollar and rising oil prices, which Fitch Ratings forecasts will average $87 per barrel in 2026.
The strengthening dollar creates a tightening of financial conditions for the global economy, increasing pressure on emerging markets that rely on foreign capital and exacerbating inflation through higher import costs. The last time geopolitical tensions in the Middle East caused a similar spike in oil prices, it shaved an estimated 0.5% off global GDP growth over the following two quarters.
The conflict's economic impact is extending far beyond the Middle East. In India, the government is grappling with the dual challenge of rising energy costs and a weakening currency. "From the government's side, for about 76 days, our objective has been to ensure that no additional burden is placed upon the people," Finance Minister Nirmala Sitharaman said, defending recent fuel price hikes by state-run oil companies.
The situation highlights the vulnerability of energy-importing nations to geopolitical shocks. Congress MP Manish Tewari criticized the Indian government's handling of the economy, noting that "Foreign Direct Investment is fleeing India... this is why there is pressure on the rupee."
Even economies with strong financial buffers are feeling the strain. Fitch Ratings recently affirmed the United Arab Emirates' 'AA-' sovereign rating, citing its massive sovereign foreign assets, estimated at 164 percent of UAE GDP in 2025. These reserves provide a critical cushion.
However, the rating agency still projects the UAE's real GDP will contract by 4.8 percent in 2026, dragged down by a slowdown in tourism, investment, and expatriate inflows. The report shows that while some nations are better equipped to handle the shock, no economy is entirely immune to the consequences of a prolonged conflict that disrupts global trade and energy flows. The UAE's strategic export infrastructure, including the pipeline through Fujairah, is seen as a key mitigator against disruptions around the Strait of Hormuz.
This article is for informational purposes only and does not constitute investment advice.
