The dollar climbed to its highest level in nearly five weeks on March 1, 2026, as the U.S. Military action against Iran spurred a flight to safety and boosted Treasury bond yields, while rising oil prices added to inflation concerns. The conflict has quickly escalated, impacting global markets and prompting a reassessment of risk.
The Bloomberg dollar index rose as much as 1 percent before paring gains to close up 0.7 percent, its strongest daily increase since January 30. The U.S. Dollar appreciated against major peers, with the Swiss franc and euro falling more than 1 percent amid worries about the impact of higher energy costs. Japan, a significant oil importer, saw the yen decline 0.9 percent.
“The dollar is the ultimate safe haven for this conflict,” said Andrew Hazlett, a currency trader at Monex Inc. “The ‘sell the U.S.’ strategy was popular, but now the pressure is reaching its limit. With the rapid increase in the price of oil and gas, traders are looking for a familiar and comfortable place to settle and wait for the situation to resolve.”
The surge came as the conflict increased expectations for inflation and drove up Treasury yields, raising questions about whether the Federal Reserve will have room to cut interest rates further this year, given that inflation already exceeds the central bank’s target. Market positioning had largely been for a weaker dollar, according to recent data from the Commodity Futures Trading Commission (CFTC), although traders reduced their bets against the dollar during the week ending February 24.
“I foresee the U.S. Dollar remaining elevated,” stated Kristina Hooper of Man Group. “Although investors may be more cautious with U.S. Treasury bonds.”
A sustained shock to oil prices is the biggest threat to JPMorgan Chase & Co.’s view that the dollar will weaken this year, according to the bank’s currency strategists. The potential for disruption to global energy supplies is a key concern for investors.
“The escalation between the U.S./Israel and Iran poses a significant risk to regional stability, and currency markets are responding primarily through the energy price channel,” wrote the JPMorgan team.
In just over 48 hours since the U.S. And Israel began attacking Iran, the conflict has rapidly expanded. Iran continued to launch missiles at countries in the Middle East in response to the attack, which reportedly killed supreme leader Ayatollah Ali Khamenei over the weekend. Explosions were heard in Israel, Saudi Arabia, Qatar, and the United Arab Emirates.
The Iranian crisis may be reviving the traditional relationship between the dollar and oil, as the United States is a net energy exporter. The correlation between the two became positive on Monday. This dynamic underscores the dollar’s role as a safe haven asset during periods of geopolitical uncertainty.
“In a world where risk aversion corresponds with supply-driven oil price fluctuations, the dollar’s appeal as a safe haven is amplified,” said Alex Cohen, a currency strategist at Bank of America Corp. “This is partly due to the U.S.’s status as an energy producer, as well as the import dependence of other traditional havens like Japan and Switzerland.”
