ISTANBUL

The Swiss National Bank (SNB) signaled on Thursday that it is more prepared to intervene in foreign exchange markets to counter excessive gains in the Swiss franc as geopolitical tensions linked to the Iran war increase demand for safe-haven assets.

The SNB kept its key interest rate unchanged at 0%, in line with market expectations, and said heightened uncertainty stemming from the conflict in the Middle East had increased its willingness to act in currency markets.

“Given the conflict in the Middle East, the SNB’s willingness to intervene in the foreign exchange market has increased,” the central bank said in its monetary policy assessment.

It added that such intervention would aim to prevent a “rapid and excessive appreciation” of the Swiss franc that could threaten price stability in Switzerland.

The Swiss franc, traditionally viewed as a safe-haven currency, has drawn support from heightened market volatility. A stronger franc can weigh on Swiss exports and add deflationary pressure to the economy.

Switzerland’s annual inflation rate stood at 0.1%, leaving limited room for policymakers to cut rates further without returning to negative interest rates, which were in place for several years until 2022. In that context, foreign exchange intervention remains one of the main tools available to the SNB to limit further franc appreciation.

The central bank’s stance could, however, draw renewed attention from the US, which has previously criticized Switzerland’s currency practices.

Last year, the US Treasury Department placed Switzerland on a monitoring list of economies whose currency practices and macroeconomic policies it said warranted close attention. Swiss authorities have rejected accusations of currency manipulation.

The US also imposed a 39% tariff rate on Swiss goods last year, citing currency practices and trade barriers. That rate was later reduced to 15% following an agreement between the two countries.

Switzerland has since come under fresh scrutiny after the Trump administration last week launched a Section 301 investigation into 16 trading partners, including the possibility of new trade measures if their policies are found to unfairly restrict US commerce.

In its policy statement, the SNB said that while higher energy prices had increased near-term inflation risks, its medium-term inflation outlook remained “virtually unchanged.”

Tensions in the Middle East remain high since the US and Israel initiated a large-scale military campaign against Iran, so far killing more than 1,300 people, including then-Supreme Leader Ali Khamenei.

Iran has retaliated with drone and missile attacks across the region and has effectively closed for most ships the Strait of Hormuz, a key oil transit route that normally handles 20 million barrels per day, and roughly 20% of global liquefied natural gas trade.