Dollar Strengthens to Multi-Month High as Iran War Fuels Safe-Haven Demand

The U.S. dollar advanced on Friday, putting it on track for its strongest monthly performance since July, as investors flocked to safe-haven assets amid escalating uncertainty surrounding the Middle East conflict.

As of 17:28 ET (21:28 GMT), the U.S. Dollar Index—which tracks the greenback against a basket of six major currencies—rose 0.3% to 100.18, extending recent gains.

Dollar on Track for Best Month Since July 2025

The dollar has gained 2.6% so far in March, marking its largest monthly increase since a 3.2% rise in July last year. The rally has been driven by a combination of safe-haven demand and shifting expectations around U.S. monetary policy.

Heightened geopolitical tensions have pushed investors toward the dollar, while rising energy prices have reinforced concerns about persistent inflation. This has led markets to scale back expectations for interest rate cuts by the Federal Reserve, with some traders now even pricing in the possibility of rate hikes in the coming months.

Bond markets have also reacted sharply, with investors selling U.S. Treasuries and driving yields higher. The benchmark 10-year Treasury yield climbed to its highest level since July, reflecting a broad repricing of interest rate expectations.

Geopolitical Tensions Weigh on Risk Sentiment

Risk assets came under pressure as fighting in the Middle East intensified. Oil prices surged above $110 per barrel, as an extension of a key deadline by Donald Trump for Iran to reopen the Strait of Hormuz did little to reassure markets.

Iranian Foreign Minister Abbas Araghchi said Israeli strikes had targeted key infrastructure, including steel plants, a power facility, and civilian nuclear sites, raising concerns that the conflict is deepening despite diplomatic signals.

Trump had previously issued an ultimatum threatening strikes on Iranian energy infrastructure if the Strait of Hormuz remained blocked. Although the deadline was extended following what he described as “very strong” discussions, Tehran has denied that any negotiations with Washington are taking place.

Euro and Sterling Weaken; Yen Near Intervention Levels

In currency markets, the euro fell 0.2% to 1.1510, while the British pound declined 0.5% to 1.3259, as Europe faces mounting energy supply disruptions linked to the conflict.

Diplomats from the Group of Seven met in France, with U.S. Secretary of State Marco Rubio highlighting the Strait of Hormuz as a central issue. He warned that any attempt by Iran to impose tolls on the waterway would be unacceptable.

The Japanese yen weakened further, with the dollar rising 0.4% to 160.25 yen. The move has brought the currency closer to levels that could prompt intervention by Japanese authorities, according to market reports.

Meanwhile, the Australian dollar, often viewed as a proxy for global risk sentiment, remained broadly stable after earlier falling to a two-month low.

Outlook

The dollar’s strength reflects a combination of geopolitical uncertainty, rising energy prices, and shifting monetary policy expectations. As long as tensions in the Middle East persist and inflation risks remain elevated, the greenback is likely to retain its safe-haven appeal in the near term.