War and the dollar: This is how the Middle East crisis is impacting the Mexican stock market.

The escalation between Israel and Iran is shaking the markets. The Mexican Stock Exchange (BMV) and the peso are feeling the strain. Find out how this global conflict is directly affecting your savings.

A drone flying thousands of miles away can have a direct impact on your wallet. The recent military escalation between Israel and Iran has generated a wave of nervousness in global markets, and the Mexican Stock Exchange ( BMV ) and the Mexican peso are not immune.

The financial world operates as an interconnected network where geopolitical uncertainty is one of the greatest poisons. The direct confrontation between Israel and Iran has set off alarm bells among investors worldwide, triggering a classic "flight to quality" movement that is affecting risk assets, including those in emerging markets like Mexico.

In recent days, the local stock market's main indicator, the S&P/BMV IPC, has shown marked volatility. Although it registered a slight increase of 0.35% in its last session on Friday, reaching 56,264.69 points, the weekly trend has been downward, reflecting the prevailing tension.

Investors are reacting to news from the Middle East. Each announcement of a new attack, a sanction, or a belligerent statement triggers selling on the stock market, as traders prefer to move their capital to assets considered safer, such as gold or U.S. Treasury bonds. Wall Street, the main benchmark for the Mexican Stock Exchange (Mexico City), has also traded with losses in key indices such as the S&P 500 and the Nasdaq, dragging down sentiment in the Mexican market.

The exchange rate is perhaps the most sensitive indicator of risk perception in Mexico. The Mexican peso has depreciated against the dollar in recent days. On Friday, the Mexican currency fell 0.16%, accumulating a weekly loss of more than 0.50%.

The exchange rate at bank counters reflects this pressure. As of the close of business on Friday, June 20, the dollar was quoted as follows at major banks:

• Citibanamex: Buy $18.44 / Sell $19.55
• BBVA Mexico: Buy $18.20 / Sell $19.33
• Banco Azteca: Buy $18.30 / Sell $19.70
• Banorte: Buy $17.80 / Sell $19.40

This weakening of the peso is due to the fact that, in times of global crisis, the US dollar strengthens as investors around the world buy it as a safe haven asset.

The connection may seem distant, but it is direct and occurs through several channels:

• Risk Aversion: As mentioned, investors are selling emerging market assets (such as Mexican stocks and bonds) to buy safe assets (dollars).
• Oil Prices: A conflict in the Middle East, the world's leading oil-producing region, could send crude oil prices soaring. While this could benefit the finances of a producing Mexico, it could also generate inflationary pressures globally, forcing central banks to maintain high interest rates, cooling the economy.
• Global Trade: A large-scale war could disrupt supply chains and global trade, affecting an open, export-oriented economy like Mexico's.

As the crisis in the Middle East continues, Mexico City's markets will continue to operate with an eye on international headlines, demonstrating that in the 21st-century economy, no country is an island.