Singapore, 9 March 2026 – DBS Bank is urging small and medium-sized enterprises (SMEs) across the region to hedge at least half of their foreign-exchange (FX) exposure as escalating conflict in the Middle East drives heightened volatility in global currency markets.
The recommendation comes amid growing geopolitical uncertainty and sharp movements in financial markets triggered by the widening regional conflict, which has pushed energy prices higher and strengthened the U.S. dollar.
Eileen Chia, regional head of corporate advisory for global financial markets at DBS, advised businesses not to attempt to predict currency movements during the current turbulent environment. Instead, companies should focus on protecting their operations by locking in exchange rates.
“Don’t try to take a view – just lock it in and remove the uncertainty from your business,” she said, stressing that hedging currency risk can help companies maintain financial stability amid unpredictable market conditions.
Rising FX Volatility Amid Geopolitical Tensions
The warning comes as global markets experience increased volatility following escalating hostilities in the Middle East. The conflict has disrupted trade routes, pushed oil prices higher and triggered a flight to safe-haven assets such as the U.S. dollar.
For businesses operating internationally, these developments have led to more pronounced swings in currency exchange rates, which can significantly affect profit margins, particularly for companies that rely heavily on imports or exports.
Analysts note that currency fluctuations can quickly erode revenue for SMEs that operate across borders but lack proper hedging strategies.
Hedge at Least 50% of FX Exposure
DBS recommends that companies hedge at least half of their foreign-exchange exposure to mitigate the impact of sudden currency swings.
By locking in exchange rates through financial instruments such as forward contracts, businesses can shield themselves from unexpected fluctuations in currency markets.
Chia emphasised that trying to “time the market” during periods of extreme volatility is risky and could expose businesses to unnecessary financial uncertainty.
Instead, hedging helps companies achieve cost predictability and better manage cash flows, especially during periods of geopolitical instability.
Expanded FX Risk Management Tools
To support businesses navigating the volatile environment, DBS has expanded access to its SecureFX facility, making the solution available to all corporate clients in Singapore.
The platform allows companies to manage currency risks more effectively by locking in exchange rates in advance and gaining better visibility over their foreign-exchange exposure.
For SMEs that operate with thin margins or rely on international supply chains, such tools can play a crucial role in ensuring financial resilience during turbulent market cycles.
Businesses Face Rising Costs
The Middle East conflict has already begun to affect businesses globally through higher energy prices, disrupted supply chains and increased logistics costs.
Singapore’s highly open and trade-dependent economy makes its companies particularly sensitive to external shocks. Rising fuel costs and currency fluctuations could translate into higher operating expenses for manufacturers, exporters and import-reliant firms.
As geopolitical risks continue to reshape global markets, financial institutions are encouraging businesses to adopt stronger risk-management strategies to navigate an increasingly uncertain economic landscape.
Preparing for Continued Uncertainty
Economists warn that volatility in currency markets could persist if the geopolitical situation worsens or energy prices continue climbing.
In this environment, proactive risk management, including FX hedging, has become an essential strategy for businesses seeking to protect their balance sheets and maintain operational stability.
For many SMEs, the message from banks is clear: rather than trying to predict market movements, the priority should be to manage risks and maintain financial certainty in an increasingly unpredictable world.
