The US 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 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.
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—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 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.
