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Global Markets Brace for Volatility Amid Tariffs & Geopolitics

  //science-technology.news-articles.net/content/2 .. ace-for-volatility-amid-tariffs-geopolitics.html
  Published in Science and Technology on Monday, February 23rd 2026 at 3:07 GMT by FXStreet
      Locales: UNITED STATES, CHINA

Monday, February 23rd, 2026 - Global foreign exchange markets are experiencing significant volatility at the start of the week, triggered by a potent combination of escalating US tariffs and persistent geopolitical uncertainties. The US Dollar, as measured by the Dollar Index (DXY), is at the epicenter of this turbulence, reacting sharply to shifts in trade policy and international security concerns.

Tariff Wars Loom Larger: A Deepening Trade Conflict

The initial concerns surrounding US tariffs have blossomed into a full-blown trade conflict, with the latest round of announcements from Washington indicating a willingness to implement significantly higher levies on a broader range of imported goods. These tariffs, initially targeted at specific industries like steel and aluminum, now threaten to encompass crucial components used in manufacturing, agricultural products, and even technology - impacting a much wider swathe of the global economy.

Experts point to a growing protectionist sentiment within the US administration, driven by domestic political pressures and a desire to reshape global trade relationships. However, the retaliatory measures already being implemented by affected nations are rapidly escalating the situation, creating a cycle of tit-for-tat tariffs that are disrupting global supply chains and jeopardizing economic growth. China, the European Union, and several emerging market economies have all announced countermeasures, further intensifying the conflict.

Beyond the immediate impact on trade volumes, analysts are concerned about the long-term consequences of this escalating trade war. Increased costs for businesses, reduced consumer spending, and a slowdown in investment are all potential risks. The erosion of trust in the multilateral trading system could also have lasting implications for global economic cooperation.

Geopolitical Hotspots Fuel Risk Aversion

The fragile geopolitical landscape is further exacerbating market anxieties. While the situation in Eastern Europe remains tense with no clear resolution in sight, a new crisis has emerged in the Middle East, involving increased naval activity in key shipping lanes. These developments are fueling fears of potential disruptions to energy supplies and further destabilizing the region.

The combination of these conflicts has led to a surge in risk aversion, as investors seek safe-haven assets. The Swiss Franc and Japanese Yen, traditionally considered safe havens, have seen increased demand, while currencies of countries directly involved in the geopolitical hotspots have come under pressure.

Dollar Index: A Barometer of Global Risk The Dollar Index (DXY), which measures the US dollar's value against a basket of six major currencies, is serving as a key barometer of global risk sentiment. The index has experienced substantial intraday swings, reflecting the constant reassessment of the potential impact of tariffs and geopolitical events on the US economy.

A strong dollar can make US exports more expensive, potentially harming US competitiveness. However, it also benefits from its status as the world's reserve currency, and investors often flock to the dollar during times of uncertainty. This creates a complex dynamic, where the DXY's trajectory is influenced by a multitude of factors. Currently, the increased uncertainty surrounding global trade and security has, overall, strengthened the dollar.

Central Bank Responses and Future Outlook

Central banks around the world are walking a tightrope, attempting to balance the need to control inflation with the risks of exacerbating the economic slowdown. The Federal Reserve, while previously signaling a hawkish stance on interest rates, is now facing increasing pressure to adopt a more dovish approach. Market participants are closely scrutinizing economic data releases, particularly inflation figures and employment reports, for clues about the Fed's next move.

The European Central Bank (ECB) is also facing a challenging situation. The Eurozone economy is particularly vulnerable to trade disruptions, and the ECB is likely to proceed cautiously with any further interest rate hikes. Other major central banks, including the Bank of Japan and the Bank of England, are also being closely watched.

The week ahead promises to be volatile, with investors bracing for further announcements on trade policy, geopolitical developments, and central bank actions. Unless policymakers can find a way to de-escalate the trade conflict and address the underlying geopolitical tensions, the current market turmoil is likely to persist. The coming days will be crucial in determining whether the global economy can navigate these challenges and avoid a deeper crisis.