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BRICS leaders and representatives emphasized the need for a long-term diplomatic solution to the Palestinian-Israeli conflict to achieve peace. In this context, Chinese President Xi Jinping U.S. President-elect Donald Trump has warned the BRICS countries that if they attempt to replace the “mighty U.S. dollar” they would face “100 percent tariffs and should Nonetheless, persisting internal risks like protectionist policies, governance gaps, geopolitical tensions, dollar dependence and currency volatility, threaten stability. A shift away from the dollar could weaken the currency, raise US interest rates and reduce demand for US Treasury securities. Some $7.4tn, or 31 per cent, of The dollar index touched a high of 107 points and is up nearly 4.52% in the last three months. The USD could scale up further due to the conflict. Institutional and foreign Four new BRICS countries Saudi Arabia, the UAE, Egypt, and Iran are from the Middle East, and evidently, the conflict in the region is proving to be costly. The only The BRICS countries arguably have the most to gain from replacing the dollar and have recently taken significant (if limited) steps away from the currency. China and The BRICS countries, comprising Brazil, Russia, India, China, and South Africa, have been working towards reducing their dependence on the US dollar in international Also Read: BRICS: US Dollar in ‘High Demand’ Amid Israel & Palestine Conflict. However, the 3-year de-dollarization initiative could add further blows to the prospects

BRICS, US Dollar, and the Israel-Palestine Conflict: A Surge in Demand

The ongoing Israel-Palestine conflict is creating ripples in the global economy, impacting currency demands and accelerating discussions around de-dollarization. Also Read: BRICS: US Dollar in ‘High Demand’ Amid Israel & Palestine Conflict. But why is this happening?

The Dollar's Rise Amidst Conflict

In times of geopolitical uncertainty, investors often flock to safe-haven assets, and the US dollar is a traditional beneficiary. The dollar index touched a high of 107 points and is up nearly 4.52% in the last three months. The USD could scale up further due to the conflict. Institutional and foreign demand for the dollar is surging as a consequence. This increased demand puts pressure on other currencies and economies.

BRICS Attempts to Reduce Dollar Dependence

The BRICS countries, comprising Brazil, Russia, India, China, and South Africa, have been working towards reducing their dependence on the US dollar in international trade. The BRICS countries arguably have the most to gain from replacing the dollar and have recently taken significant (if limited) steps away from the currency. China and other member nations see this as a way to gain economic autonomy and shield themselves from US economic policies.

However, a shift away from the dollar isn't without risk. A shift away from the dollar could weaken the currency, raise US interest rates and reduce demand for US Treasury securities. Some $7.4tn, or 31 per cent, of global reserves are still held in US dollars.

The Role of New BRICS Members and the Middle East

Four new BRICS countries Saudi Arabia, the UAE, Egypt, and Iran are from the Middle East, and evidently, the conflict in the region is proving to be costly. The only certainty is that the economic implications will continue to unfold. The 3-year de-dollarization initiative could add further blows to the prospects of the US dollar as BRICS nations seek to increase their trade in local currencies.

Geopolitical Tensions and Dollar Dominance

Persisting internal risks like protectionist policies, governance gaps, geopolitical tensions, dollar dependence and currency volatility, threaten stability. Chinese President Xi Jinping U.S. President-elect Donald Trump has warned the BRICS countries that if they attempt to replace the “mighty U.S. dollar” they would face “100 percent tariffs and should. Yet, the conflict exacerbates existing tensions and increases the appeal of alternative financial systems.

Seeking a Long-Term Solution

BRICS leaders and representatives emphasized the need for a long-term diplomatic solution to the Palestinian-Israeli conflict to achieve peace. However, achieving a peaceful resolution is complex and will likely not provide immediate relief to the economic pressures that are fueling the demand for the US dollar.

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