FX market connectedness during the Israel–Iran 12-day confrontation: evidence from minute-level data

Purpose This paper examines how volatility was transmitted across global and regional currencies during the June 2025 Israel–Iran confrontation. Design/methodology/approach Using minute-level FX data covering 12–24 June 2025, we apply a TVP-VAR connectedness framework with APARCH-based volatility modelling to track how shocks moved across currency pairs in real time. Findings EUR/USD and GBP/USD generate large outward spillovers, while USD/CNY records the strongest positive full-horizon NET position. Regionally exposed currencies are predominantly net receivers, although transmitter and receiver positions change across short intraday horizons. EGP/USD, ILS/USD and SAR/USD mainly absorb shocks from dominant global pairs, while SAR/USD shows more limited volatility, consistent with its pegged exchange-rate regime. Connectedness also increases sharply on 18 June despite the absence of a single discrete major event in the study's chronology. We interpret this as heightened market repricing during evolving geopolitical uncertainty, while recognising that the connectedness measure does not identify the specific information responsible. Several currency pairs also switch between transmitter and receiver roles within 2–5-min intervals. Originality/value The study provides new evidence on how geopolitical stress is transmitted through the FX network at minute-level frequency. Its main contribution is economic rather than methodological. Geographic exposure does not translate mechanically into a currency's role as a source of volatility transmission: under the baseline specification, regionally exposed currencies are predominantly net receivers, while highly liquid global currency pairs generate substantial outward spillovers. The intraday decomposition shows that cross-currency transmission develops over successive minutes and that transmitter and receiver positions can change over short horizons across markets.