The Super Franc challenges Switzerland amid safe haven, markets, exports and tourism

The new geopolitical crisis in the Middle East has once again placed the Swiss franc at the center of the global financial stage. Since the beginning of the conflict in Iran, which erupted in the first days of March 2026 and intensified with the direct involvement of the United States and Israel as well as the temporary closure of the Strait of Hormuz, international investors have launched a massive rotation of capital toward assets considered safer. Among these, the Swiss currency has once again confirmed itself as the ultimate safe-haven asset. The result has been a rapid appreciation of the franc in foreign-exchange markets. The Swiss currency has reached levels not seen since 2015, falling below 0.91 against the euro and touching peaks around 0.77 against the dollar in the early stages of the crisis.

While the franc represents a financial safe deposit box for global investors, its strength is a double-edged sword for the Swiss economy. On the one hand, a stronger currency acts as a shield against imported inflation. With a strong franc, Switzerland pays less for energy and raw materials denominated in dollars, helping to limit the impact of soaring oil prices that are affecting much of Europe. On the other hand, the exchange rate penalizes the real economy, particularly sectors most exposed to exports. Many companies have already reported a reduction in profit margins estimated at around 5%, due to the difficulty of passing on the effects of an unfavorable exchange rate to final prices.

The first sector to feel the impact of the super-strong franc is tourism, historically among the most vulnerable to currency fluctuations. With such a strong currency, Switzerland automatically becomes more expensive for foreign visitors. According to industry associations, booking cancellations began to rise already in the first weeks of March, not only from Middle Eastern countries but also from key markets such as the United States and Asia. The phenomenon is amplified by the so-called “visible price effect”: a hotel stay or even a simple coffee in major Alpine destinations or Swiss cities can appear up to 10–15% more expensive for a European or American tourist solely due to exchange-rate effects.

The industrial heart of Switzerland is also beginning to feel the weight of the currency. The mechanical engineering, electronics and metallurgy sectors - which employ more than 300,000 people - often operate with relatively thin margins. Many companies produce industrial components destined for international markets and cannot raise prices in euros or dollars without losing competitiveness. As a result, the appreciation of the franc translates directly into a reduction in operating margins and growing pressure to relocate part of production to the euro area.

The watchmaking sector shows a more complex dynamic. Major luxury brands continue to benefit from relatively inelastic demand: collectors and high-income clients are less sensitive to price changes. The situation is different in the mid-range and entry-level segments of the market. Watches priced below 500 francs are facing increasingly aggressive competition from Asian manufacturers and international fashion brands. In the first months of 2026, exports in this segment have already declined by about 4.5%.

The pharmaceutical and chemical sector remains the pillar of Swiss exports, but even this industry is not completely immune to the strength of the franc. The United States represents the main export market for Swiss companies in the sector. With the weakening of the dollar against the Swiss currency, revenues generated overseas shrink once converted into francs. At the same time, industry associations warn that the combination of a strong franc and new international regulations could push part of productive investment outside Switzerland.

The growing strength of the currency places the Swiss National Bank in front of a delicate balancing act. On one hand, the central bank must prevent the franc from strengthening excessively, which could push the economy toward deflation and damage exports. On the other hand, any intervention in foreign-exchange markets can be interpreted as currency manipulation by trading partners. The risk of diplomatic tensions with the United States is real. The American administration is closely monitoring Swiss monetary policy, especially after Switzerland’s trade surplus with the United States reached a record 55 billion francs in 2025. In recent months, Switzerland has already faced punitive tariffs on its exports to the U.S. market, later reduced after complex diplomatic negotiations.

In this context, the monetary policy meeting scheduled for March 19 represents a key moment. Among the options on the table, a return to negative interest rates - a measure already used in the past to discourage capital inflows into the franc - is not excluded. The last phase of significant intervention dates back to the period 2022–2023, when the central bank purchased around 155 billion francs using part of its foreign-exchange reserves to strengthen the currency and contain imported inflation caused by the surge in energy prices following the war in Ukraine.

The outlook for the franc remains closely tied to the evolution of the conflict in the Middle East. If the crisis were to resolve quickly, analysts expect a technical correction, with the euro-franc exchange rate potentially returning to the 0.93–0.95 range. In the case of prolonged escalation, however, demand for safe-haven assets could push the Swiss currency to new historic highs.

Andrea Pelucchi