The dollar is on track for its best month since September 2022 as the Iran war has upended energy markets, dashing economic forecasts and drawing investors toward the world’s primary reserve currency.
Buoyed by those haven flows, the Bloomberg Dollar Spot Index is up about 3% this month. The US’s position as the world’s largest producer of crude oil has also supported the currency amid rising global energy prices as global growth expectations fade.
“The dollar has gained traction as a safe haven as global growth expectations weakened,” said Noah Buffam, strategist at CIBC Capital Markets.
Investors have supported the dollar after disruptions in global energy markets – notably the closure of the Strait of Hormuz – highlighted Europe and Japan’s reliance on oil and natural gas imports. Traders fearing dollar weakness ahead of the conflict quickly abandoned those bets. They now have more than $7 billion of bullish bets in the derivatives market – the most since December 2025.
Some Wall Street banks that had taken a dovish view of the dollar this year — among them JPMorgan Chase & Co. and Goldman Sachs Group Inc. — are now reconsidering their stance on the U.S. currency. However, day-to-day fluctuations in global risk sentiment and news headlines make it extremely difficult to update forecasts.
Meanwhile, expectations have risen that the US Federal Reserve will cut interest rates this year as renewed inflation fears are prompting traders to reconsider. In the options market, bets on the dollar’s upside dominate the outlook for next month, although the near-term situation beyond that suggests expectations for reduced strength.
Still, other investors and market watchers, including Invesco Ltd. and Barclays Plc, worry that the Iran war will reignite discussions related to a fundamental, long-term move away from U.S. markets and the greenback, driven by the vagaries of policymaking under President Donald Trump.
“Geopolitical risks and renewed inflation concerns pushed investors toward safe havens and strengthened the interest rate differential in favor of the US,” said Nathan Thooft, a senior portfolio manager at Manulife Investment Management. “Given that the near-term safe haven premium is now priced in our view, we would fade the rally.”
