President Trump announced a blockade of Iranian ports at 10ET today following failed peace talks over the weekend, prompting a firmer US Dollar (USD) and significant moves across asset classes, including weaker stocks and bonds and a jump in oil prices [1]. Scotiabank strategists note that while the USD is tracking higher, the Dollar Index (DXY) is trading off its early Asian high, which barely exceeded the intraday high of 99.2 made Wednesday after Tuesday’s cease fire announcement [1]. Despite the rebound, the DXY price action remains within a broader bearish setup after last week’s sharp fall [1]. Scotiabank also warns that sustained high oil prices could damage global growth, particularly impacting Asian countries due to curtailed Gulf supply [1].
Rabobank’s Senior FX Strategist Jane Foley reports that speculators are rebuilding long USD positions, with the US currency acting as the preferred safe haven during the Middle East conflict [2]. However, she points out that current long USD positions, as indicated by CFTC FX positioning data, are significantly smaller than their peaks in recent years [2]. Foley highlights ongoing de-dollarisation pressures from Russia, China, and the EU, but expects near-term Dollar moves to hinge on risk appetite and US rate expectations [2]. She emphasizes that the USD’s safe haven status is supported by its liquidity and global transactional use, suggesting the Dollar is likely to remain a safe haven for now [2].
Both sources agree that the USD is benefiting from geopolitical tensions and safe haven flows, but Scotiabank notes that the upside is limited and the broader trend remains bearish, while Rabobank underscores structural challenges and the importance of risk appetite and rate expectations for future moves [1][2].
CONCLUSION
The US Dollar has strengthened in response to President Trump’s blockade of Iranian ports and ongoing Middle East tensions, with safe haven flows supporting its position. However, both Scotiabank and Rabobank highlight that the upside is limited and structural challenges persist, suggesting that future Dollar moves will depend on risk appetite and US rate expectations. Market participants remain cautious, awaiting further clarity on the blockade’s scope and its impact on global growth.