The U.S. dollar strengthened to a 14-month peak against major peers as geopolitical tensions with Iran intensified, driving safe-haven demand. Crude oil and energy-sector stocks, including XLE and CL=F, saw sharp moves amid supply risk concerns.
- Dollar index reached 107.8, its highest since January 2025
- CL=F crude oil futures rose 8.4% to $89.60 per barrel
- XLE energy ETF gained 6.2% over three days
- Dollar-euro rate climbed to 1.115, dollar-yen to 148.3
- Geopolitical risk is driving safe-haven demand and supply concerns
- Energy and defense sectors showing significant market repricing
The U.S. dollar index rose to 107.8 by early March 2026, its highest level since January 2025, as escalating tensions in the Middle East prompted investors to seek refuge in dollar-denominated assets. The surge followed increased military posturing by Iran and retaliatory actions by regional allies, raising fears of disrupted oil flows through the Strait of Hormuz. This flight to safety bolstered the greenback, with the dollar-euro exchange rate climbing to 1.115 and the dollar-yen rate reaching 148.3, signaling broad-based demand. Crude oil prices responded sharply, with West Texas Intermediate (CL=F) futures jumping 8.4% over a three-day period to settle at $89.60 per barrel, reflecting heightened supply risk. Energy equities, represented by the Energy Select Sector SPDR Fund (XLE), rose 6.2% in the same span, driven by expectations of tighter global supply. The movement underscores how geopolitical instability can rapidly reprice energy markets, particularly when critical chokepoints like the Strait of Hormuz are perceived to be under threat. Market participants are now pricing in a higher risk premium for energy and defense-related assets. Defense contractors and firms with Middle East exposure have seen increased trading volume, with some stocks registering their strongest weekly gains in over a year. As the dollar’s strength persists, it may compress margins for import-dependent economies and pressure emerging market debt, especially those with dollar-denominated liabilities. The dollar’s resilience reflects not only immediate risk aversion but also the enduring role of the U.S. currency as a global safe haven during times of crisis. If tensions persist, the upward pressure on the dollar could continue, potentially triggering broader market adjustments across commodities, equities, and fixed income.