The dollar is on track for its best month since September 2022 as the Iran war upends energy markets, buffets economic forecasts, and sends investors rushing to the world’s primary reserve currency.
Buoyed by those haven flows, the Bloomberg Dollar Spot Index is up about 3% this month. The US position as the world’s largest producer of crude oil has also supported the currency amid a surge in global energy prices, as have fading expectations for global growth.
“The dollar rallied as a safe haven bid on weakening global growth expectations,” said Noah Buffam, strategist at CIBC Capital Markets.
Investors have favoured the dollar since the disruption to global energy markets—particularly the shuttering of the Strait of Hormuz—highlighted Europe and Japan’s dependence on oil and natural gas imports. Traders, positioned for dollar weakness before the conflict, quickly abandoned those wagers. They now hold more than $7 billion in bullish bets in the derivatives market—the most since December 2025.
Some Wall Street banks that held a dim view on the dollar heading into the year—JPMorgan Chase & Co. and Goldman Sachs Group Inc. among them—are now reconsidering their stance on the US currency. However, day-to-day swings in global risk sentiment and news headlines make updating forecasts exceedingly difficult.
Expectations that the US Federal Reserve will cut interest rates this year, meanwhile, have foundered as renewed inflationary fears drive traders to reconsider. In the options market, bets on dollar gains dominate the outlook for the next month, although positioning for the period beyond that shows that expectations are for the strength to fade.
Still, other investors and market watchers, including at Invesco Ltd. and Barclays Plc, worry that the Iran war will reignite discussions concerning a fundamental, long-term move away from US markets and the greenback, driven by the vagaries of policymaking under President Donald Trump.
“Geopolitical risk and renewed inflation concerns pushed investors toward safe havens and reinforced interest rate differentials in favour of the US,” said Nathan Thooft, a senior portfolio manager at Manulife Investment Management. “Given much of the near-term safe haven premium is now priced in our view, we would fade the rally.”