The U.S. dollar climbed in early Monday trading, gaining 0.45% against major currencies, as investors sought safe-haven assets following U.S. military strikes on Iran. Yet, experts suggest the rally could be temporary, as broader fiscal concerns and trade tensions loom.
Safe-Haven Demand Lifts Dollar Amid Middle East Crisis
The greenback’s strength came amid heightened geopolitical risk, with markets responding to the escalation of the Middle East crisis. Analysts at Danske Bank noted that rising oil prices and falling equities are part of the typical market reaction, boosting the dollar’s appeal as a safe haven.
Despite this, the U.S. dollar index remains down over 8% for the year, underscoring longer-term challenges.
Fears Over Strait of Hormuz Keep Markets on Edge
Investor attention is sharply focused on potential disruptions to oil flows through the Strait of Hormuz, a critical transit route. RBC Capital Markets warned that Iran may use asymmetric tactics to disrupt shipping, though a complete closure is seen as unlikely.
Mizuho strategist Jordan Rochester added that pressure from Iran’s allies, particularly China, could help keep the strait open, averting a spike in oil prices.
U.S. Fiscal Policy and Trade Tensions Could Undermine Dollar
Underlying the dollar’s current strength are deep concerns over U.S. fiscal policy and an escalating trade war. Analysts from Macquarie and Bank of America warn that absent the Middle East crisis, the dollar would likely be trending lower due to fears of widening deficits and potential tariffs on European imports.
Also Read: Brazil Defies US Dollar Dominance as BRICS 2025 Chair—Will Trump’s 150% Tariffs Strike?
Muted movement in U.S. Treasury yields further signals market hesitation, as investors weigh both geopolitical risks and fiscal instability.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of CoinBrief.io. Before making any investment decisions, you should always conduct your own research. Coin Brief is not responsible for any financial losses.
