As we navigate an unprecedented convergence of geopolitical crises—from the protracted Russia-Ukraine war and escalating conflicts in the Middle-East, oil market volatility, and the erosion of multilateral institutions—that collectively reshape global currencyThe money used in a particular country at a particular time, like dollar, yen, euro, etc., consisting of banknotes and coins, that does not require endorsement as a medium of exchange. More dynamics and the demand for physical cashMoney in physical form such as banknotes and coins. More. These crises accelerate three structural shifts: the fragmentation of historical currency blocs, the resurgence of cash as a safeSecure container for storing money and valuables, with high resistance to breaking and entering. More haven and budgeting tool, and a fundamental alteration in how nations and individuals perceive financial sovereignty.
Amid geopolitical turbulence, investors flock to safe-haven currencies—primarily the U.S. dollarMonetary unit of the United States of America, and a number of other countries e.g. Australia, Canada and New Zealand. More (USD), Swiss franc (CHF), and gold—to preserve capital. The USD remains the world’s dominant reserve currency, accounting for 55% of global reserves in 2026 despite a continued decline from 71% in 1999. The Swiss franc has also appreciated during the crises due to Switzerland’s political neutrality. Gold prices hit record highs in 2025, driven by central bank buying, particularly from China and Russia, as a hedge against currency volatility and geopolitical risks.
The flight to safety is evident in recent geopolitical shocks. Following the U.S. tariff announcements in April 2025, the USD initially depreciated while U.S. Treasury yields rose, reflecting heightened market volatility and risk aversion. The euroThe name of the European single currency adopted by the European Council at the meeting held in Madrid on 15-16 December 1995. See ECU. More (EUR) appreciated during this period, behaving more like a safe-haven currency.
Dedollarization—the reduction of reliance on the USD in global trade and reserves—is advancing but remains uneven. The expanded BRICS+ alliance (Brazil, Russia, India, China, South Africa as well as members Argentina, Egypt, Iran, Saudi Arabia, UAE and Ethipia) are leading efforts to trade in local currencies, reducing USD dependence. Russia, for instance, conducts 90% of its trade within BRICS in local currencies.
However, dedollarization is limited by the USD’s entrenched role in global finance. While trade diversification progresses, finance remains heavily dollar-dependent, supported by unmatched liquidityDescribes the extent to which assets or rights can be converted into cash without causing a significant decrease in the asset’s price. Accordingly, liquidity is often inversely proportional to the profitability of the asset and involves the trade-off between the selling price and the time needed to convert it to cash. In finance, cash is considered the most liquid asset and cash is sometimes used as a synonym for liquidity (e.g. cash reserves; cash pooling…). More, deep capital markets, and its role as a global benchmark.
The Israeli shekel (ILS) experienced a 15%% in Q4 2025, prompting the Bank of Israel to intervene to stabilize the currency. The Lebanese pound has collapsed into hyperinflation, with 90% of transactions dollarized as the country grapples with political instability and financial crisis. The Ukrainian hryvnia (UAH) has maintained artificial stability through capital controls and Western aid, despite the war’s economic toll. As for the Russian ruble, it has defied sanctions and has remained stable in relation to other currencies in 2025 though its long-term stability hinges on oil price volatility.
These cases exemplify how war economies force monetary extremes—currency controls, black markets, or dollarization—to maintain economic function amid conflict.
The renewed Iran-US conflict in 2025-2026 has intensified sanctions on Iran, further isolating its economy and currency. The Iranian rial has collapsed, with 90% of transactions dollarized in black markets.
The Iran-US conflict has also accelerated dedollarization efforts, with BRICS nations and China leading the shift to local currencies and alternative reserves.
Demand for physical cash surges during crises, reflecting its unique attributes: tangibility, resilience, offline usability, and universal acceptance. In the US, $100 bills now constitute 85% of the value of USD notes in circulation, up from 60% in 2020, signaling heightened demand for high-denomination notes as a store of valueOne of the functions of money or more generally of any asset that can be saved and exchanged at a later time without loss of its purchasing power. See also Precautionary Holdings. More. The European Central Bank (ECB) notes that euro banknoteA banknote (or ‘bill’ as it is often referred to in the US) is a type of negotiable promissory note, issued by a bank or other licensed authority, payable to the bearer on demand. More circulation has grown robustly, with cash demand spiking during crises such as COVID-19 and the Russia-Ukraine war.
Historical crises—2008 financial crisis, Greek debt crisis, COVID-19 pandemic—triggered immediate and extreme increases in cash demand, often exceeding 130% of pre-crisis levels. The ECB’s analysis of daily ATM withdrawals during the 2025 Iberian blackout revealed a 41-42% drop in digital payments and a 54% fall in e-commerce, while cash withdrawals surged in unaffected regions as people sought liquidity.
Cash serves as a critical tool for budget management in sanctions-hit or economically isolated nations. Russia, is reported to use cash to pay soldiers and mercenaries, avoiding digital transfers that could trigger sanctions. Iran relies heavily on USD cash in black markets due to the rial’s collapse and sanctions. Venezuela’s failed petro digital currency experiment has led to a return to USD cash dominance in transactions.
Cash avoids sanctions tracking and provides liquidity outside formal financial systems, enabling economic activity where digital payments are restricted or distrusted.
Cyberattacks on financial institutions surged in 2023–2025, with 3,348 reported incidents in 2023 alone, up from 1,829 in 2022. Ransomware attacks affected 65% of financial institutions in 2024, with average recovery costs exceeding $3 million. High-profile breaches, such as the ICBC US ransomware attack and MOVEit vulnerabilities affecting millions, underscore the financial sector’s vulnerability
Geopolitical tensions increase the likelihood of cyberattacks targeting banks, exacerbating risks of financial instability and eroding trust in digital systems. This drives demand for cash as a tangible, offline store of value and payment instrumentDevice, tool, procedure or system used to make a transaction or settle a debt. More.
The role of cash as a geopolitical tool and psychological insurance is evolving. Emergency agencies in Europe, the US and elsewhere recommend maintaining cash reserves for crisis preparedness, recognizing cash’s irreplaceable role in ensuring financial stability and reducing vulnerability to technological failures.
The global financial system faces increasing fragmentation due to geopolitical tensions, which may lead to greater volatility in exchangeThe Eurosystem comprises the European Central Bank and the national central banks of those countries that have adopted the euro. More rates, capital flows, and trade. The demand for cash is likely to persist as nations and individuals seek resilience against uncertainty, cyber risks, However, for cash to fulfil its role as a safe haven during crises policymakers must ensure that it functions smoothly in normal times.