It sometimes takes a ceasefire to shake up the most deeply rooted monetary certainties. Since April 7, the Middle East truce has acted as a brutal revealer of a truth that financial markets have always feared: behind the smoothed curves and calming indicators, the world remains suspended on politically uncertain decisions. This moment of relative calm, almost artificial, reshapes global financial flows, changes exchange arbitrations, and questions the strength of a monetary system still dominated by the dollar.
At first glance, the signals are reassuring. The fall in oil prices following the geopolitical lull immediately loosened the inflationary grip on major economies. At the same time, stock markets have returned to near recent highs, signaling a return of risk appetite. This dual movement mechanically weakened the U.S. dollar, whose traditional role as a safe haven has faded in a perceived less threatening environment.
The Return of Carry Strategies
In this calming environment, a well-known mechanics, operation carry trade, reasserts itself. Investors borrow in low-yield currencies, starting with the Japanese yen, to finance investments in higher-yielding assets. This strategy thrives when volatility is low, and stability expectations dominate.
The case is particularly revealing. Artificially kept low by ultra-accommodative monetary policy, the yen is an ideal source of funding for these arbitrages. As long as rates, notably Japanese, remain low and global volatility stays contained, the yen is doomed to play the role of a financing currency at the expense of its valuation.
The Weakened, but Still Dominant Dollar
The recent dollar weakening should not be seen as a structural decline but rather as a conjunctural adjustment linked to the relaxation of the international environment. The greenback still holds considerable fundamental strengths: deep financial markets, status as the global reserve currency, and a central role in international payment systems.
However, this episode highlights a growing tension. The dollar is both a power currency and a crisis currency. Its strength paradoxically depends on world instability. When tensions ease, it weakens; when they intensify, it strengthens. This duality creates a form of systemic dependence on geopolitical volatility.
The Specter of Extreme Risk
Behind the current optimism looms a scenario that markets dread without fully integrating: the resumption of conflict. A major military escalation, notably involving direct U.S. engagement, would cause a brutal shock across all financial assets.
In such a scenario, the current mechanisms would instantly reverse. Oil prices would rise, fueling inflation fears. Stock markets would correct sharply. Investors would rush to safe assets. In this context, the dollar would regain its strength, accompanied by a spike in exchange market volatility.
Monetary Policies Under Constraint
Beyond market dynamics, this episode sheds light on central banks’ dilemmas. Faced with mixed economic data, they hesitate on rate trajectories. In the UK, for example, expectations of a decline in 2026 already weigh on the pound, reflecting uncertainty surrounding British monetary policy.
On the other hand, the Bank of Japan seems compelled to maintain accommodative policy longer than expected. Global uncertainty justifies this status quo but at the cost of a prolonged weakening of the yen.
A Systemic Reading of Markets
What is happening today goes beyond currency evolution. It is a revealing moment of how financial markets integrate – or ignore – geopolitical risk. Volatility decrease, often seen as a sign of stability, can also reflect a form of collective shortsightedness.
Investors, in search of returns, tend to favor the most favorable scenarios, relegating extreme risks to the background. This dynamic, well known to economists, fuels cycles of euphoria and correction that punctuate market history.
Context for Tunisia
For an economy like Tunisia’s, these developments are not neutral. Short-term relief for external balances and public finances comes from falling oil prices. A weaker dollar can also ease the cost of debt servicing in foreign currencies.
But this improvement remains conditional. A resurgence of tensions would quickly reverse these benefits, exposing the Tunisian economy to a difficult external shock. In a context marked by structural fragilities, dependence on international dynamics remains a major vulnerability factor.
More fundamentally, this sequence underscores the importance for emerging economies to strengthen their resilience to external shocks. Energy diversification, fiscal consolidation, and the development of domestic financial markets appear as essential levers to mitigate the impact of these fluctuations.
In Conclusion, Calm Before Uncertainty
This moment of respite in financial markets resembles less a stabilization than a suspension. A fragile pause, suspended on the whims of a diplomatic negotiation whose outcome remains uncertain.
The paradox is striking: markets have never seemed so confident, yet the foundations of that confidence have never been so precarious. Between hopes of a lasting agreement and fears of escalation, investors navigate sight, oscillating between optimism and caution.
In this global center where geopolitics sets the tempo, currencies are merely reflections of a deeper reality: a world where balance remains inherently unstable.
