Global crises follow a certain rhythm. The stock market declines. spikes in oil. The same instinct takes over somewhere in the hectic back-and-forth of trading desks in Singapore, New York, and London: buy dollars. Even those who had been quietly debating the dollar’s greatest days as a crisis refuge were taken aback by the force behind it when it happened again this week.
The dollar index increased by almost one percent in a single session on Monday after U.S. strikes on Iranian targets shook markets. To put things in perspective, it was the strongest day for the currency in seven months. The response was clear and concise on trading floors that had spent the better part of the previous year discussing whether the euro, the yen, or gold had finally overtaken the greenback. Not just yet.
| Category | Details |
|---|---|
| Topic | US Dollar as Global Safe-Haven Asset |
| Currency Index | US Dollar Index (DXY) |
| Recent DXY Move | +~1% on the day of US strikes on Iran (best single-day gain in 7 months) |
| Current EUR/USD | ~$1.1542 |
| Current GBP/USD | ~$1.3353 |
| USD/JPY | ~159.54 |
| USD/CNY (offshore) | ~6.915 |
| Brent Crude | ~$106.47/barrel (+4.16%) |
| US Jobless Claims | Edged higher but labor market remains stable |
| Key Analysts Quoted | Karl Schamotta (Corpay), Eric Theoret (Scotiabank), Jane Foley (Rabobank), John Velis (BNY) |
| Fed Policy Direction | ~10 bps of tightening priced in; rate cut expectations reversed |
| US Energy Status | Net energy exporter — insulated from oil price shocks |
| EM Bond Fund Outflows | ~$1.1 billion (week ending June 11, per EPFR data) |
| Reference Website | Reuters – Markets & Finance |
The sentiment was summed up by Karl Schamotta, chief market strategist at Corpay in Toronto: “a tide of disappointment washing across markets as cease-fire hopes in the Middle East faded.” That’s not mild concern in the language of analysts. Traders don’t wait for clarification when diplomacy stalls and Iranian foreign ministers talk about reviewing proposals without actually speaking. They purchase what they are familiar with.
The euro fell to $1.1542. Sterling dropped to $1.3353. In relation to the yen and yuan, the dollar strengthened. The price of oil surpassed $106 per barrel. Anyone who has followed the financial markets during the last 20 years of unrest in the Middle East would recognize the pattern: risk declining, the dollar rising, and everyone discreetly pretending they weren’t caught leaning in the wrong direction.
This isn’t merely a reflex, so it’s worth taking a moment to consider what’s really going on structurally. The US exports more energy than it imports. Compared to, say, Japan or the euro zone, both of which are facing rising import costs with few domestic buffers, that one fact alters the dollar’s response to an oil shock. The European Central Bank has already hinted that if inflation rises due to war-related energy prices, rates may be raised. Though its deputy governor pointed out that the labor market is weaker now than it was during the 2022 Russia-Ukraine shock, which may limit the spread of second-round inflation, the Bank of England is threading a similar needle. In contrast, the economy that benefits marginally from higher energy prices is supported by the dollar.
The Treasury market comes next. There is just no other market on the planet with the depth to absorb those flows when international investors need to de-risk rapidly and in large quantities. The U.S. Treasury market is truly the only one that can manage those flows, according to Eric Theoret of Scotiabank. It’s not advertising language. Every time a crisis arises, the dollar’s claim to be a safe haven is subtly supported by this structural reality. Demand for dollars is correlated with demand for Treasury bonds. The chain is dependable and brief.
The source of the dollar is what makes this moment so intriguing. The dollar did something unusual earlier this year when a widespread global selloff was sparked by Washington’s broad tariff announcement in April: it declined alongside riskier assets. At the time, analysts began posing awkward queries. Had the dollar violated its own regulations? Macro Hive strategists put it simply: Liberation Day made investors prioritize the rest of the world over the dollar. It makes sense that people did not want to put their money in the currency of the nation causing the chaos.
That’s the difference that counts right now. The dollar’s safe-haven logic fails when the shock comes from within the United States. When the uncertainty comes from the dollar’s own government, investors do not rush to the dollar. However, the old logic reappears surprisingly quickly when the crisis is external, geopolitical, and energy-related. According to John Velis at BNY, the dollar’s appeal appears to be unaffected when it’s an international crisis as opposed to a domestic one. It’s difficult to disagree with him given how swiftly that change occurred this week.
However, there are good reasons to maintain skepticism. Rabobank’s Jane Foley accepted the assurance but maintained her position, stating that the argument is still ongoing. State Street Investment Management’s Aaron Hurd was more straightforward, pointing out that a general economic fear without an energy component would probably result in a much weaker environment for the dollar. There is a plausible argument that the dollar’s correlation with risk assets during significant shocks has structurally increased given the United States’ high fiscal deficits, changing policy signals, and the magnitude of global exposure to American assets. The fissures might become more apparent in a future crisis that is less related to oil and more related to domestic instability.
However, the immediate picture is sufficiently clear for the time being. Last week, there was a slight increase in new unemployment claims, but not enough to cause concern. The job market is stable. Under pressure from the administration, the Fed had been stealthily moving toward rate cuts. Now, the Fed is facing repricing, which has caused markets to move toward about ten basis points of tightening this year—a significant reversal from where things were just a few days ago. It was a significant change, according to Uto Shinohara of Mesirow Currency Management in Chicago. Yes, it is.
There’s a sense that markets are still attempting to determine whether this conflict will end quickly or continue. A longer blockage in the Strait of Hormuz is anticipated by traders, and if it occurs, every central bank in the world will have a very different conversation about the energy price feedback loop leading to inflation. The dollar appears more protected than most due to its unparalleled market depth and energy export cushion. It’s not a forecast. It’s simply where the math puts you.
The longer picture is still genuinely unclear. Both Beijing and Cardiff analysts have observed that structural confidence in dollar assets is being quietly but steadily undermined by fiscal deficits, unpredictable policy, and a slow global interest in alternatives to dollar-denominated settlement. That doesn’t happen all at once. And none of it was evident during Monday’s trading session, when the US dollar performed as it has for the better part of a century in the face of wars, oil shocks, and financial panics.
The world still purchases dollars when it is sufficiently terrified. That is still the same. The question of whether it will change the next time is still unanswered.