The U.S. dollar surged on March 2, 2026, as crude oil prices spiked to their highest level in four years following the effective closure of the Strait of Hormuz due to escalating U.S.-Israel military operations against Iran. The rally in CL=F erased near-term bets on Federal Reserve rate cuts, triggering sharp movements across FX, energy, and fixed income markets.
- CL=F surged 12.3% to $121.80, the largest one-day gain in four years
- DX=F rose 1.4% to 107.87, its highest since late 2024
- ZB=F dropped 1.2%, pushing 10-year Treasury yields to 4.78%
- VIX jumped to 29.4, up 44% from prior session
- Brent crude breached $128/barrel, its highest since 2022
- Fed rate cut bets fully erased, with June 2026 now unlikely
The dollar index, tracked by DX=F, rose 1.4% to 107.87, its strongest level since late 2024, as geopolitical tensions intensified in the Persian Gulf. The closure of the Strait of Hormuz—through which nearly 20% of global oil flows pass—sparked a 12.3% jump in Brent crude futures, pushing prices above $128 per barrel, the highest since 2022. U.S. West Texas Intermediate (WTI) crude, contract CL=F, rose to $121.80, marking its largest single-day gain in four years. The surge in oil prices fundamentally altered market expectations for monetary policy. The Federal Reserve’s benchmark rate cut window, previously anticipated in June 2026, has been fully priced out. Futures on ZB=F, the 10-year U.S. Treasury bond, dropped 1.2% in value, pushing yields to 4.78%, the highest since mid-2023. The VIX index, a measure of market volatility, spiked to 29.4, up 44% from the prior session, reflecting heightened risk aversion. Energy and defense firms saw immediate market reactions. ExxonMobil (XOM) gained 3.6% on strengthened outlooks, while Lockheed Martin (LMT) rose 2.8% as defense spending expectations increased. Meanwhile, U.S. dollar-denominated commodities, including gold and silver, declined as the greenback’s strength pressured non-yielding assets. The broader S&P 500 dipped 0.7%, with energy stocks outperforming, up 2.1%, while tech sectors lagged. The situation remains fluid, with regional shipping lanes under surveillance and global insurers reassessing risk exposure. The closure, though not officially declared by any government, has been confirmed through satellite imagery and maritime tracking data, underscoring the real-time impact of conflict on global markets.