Safe-Haven Flows Push Dollar Higher as Tensions in Iran Remain High
The US dollar extended its gains as escalating tensions involving Iran continued to fuel demand for safe-haven assets. Investors are increasingly concerned about a deepening global energy crisis and its potential impact on major economies.
The US Dollar Index (DXY) continued to advance, trading near the key 100.00 level during the New York session on March 27. Demand for safe-haven assets has surged amid the uncertainty of the Iran conflict, which shows no signs of easing.
Despite US President Donald Trump's announcement of a 10-day delay in attacks on Iranian energy facilities until April 6, markets are largely unmoved. The delay was framed as an opportunity to allow ongoing negotiations to progress, but investor sentiment remained cautious.
In fact, tensions have continued to escalate on the ground as reported by The Wall Street Journal and Axios. The Pentagon is reportedly considering sending an additional 10,000 ground troops to the conflict area. Israeli Defense Minister, Israel Katz, also emphasized that attacks on Iran will continue without easing.
The latest attacks reportedly targeted Iran's strategic infrastructure, including nuclear facilities in Khondab and uranium processing plants in Ardakan. The Iranian government stated that there was no radiation leak, but the Islamic Revolutionary Guard Corps (IRGC) issued retaliatory threats against companies linked to the US and Israel in the Gulf region.
These developments have further eroded hopes for a near-term resolution to the conflict. As a result, investors have increasingly shifted away from currencies of energy-importing nations and moved toward the US dollar as a hedge against geopolitical and energy-related risks.
Carol Kong, an economist at Commonwealth Bank of Australia, said the conflict could prove prolonged and continue to underpin the dollar's strength. She noted that sustained increases in oil prices stemming from extended hostilities would likely place additional pressure on currencies such as the Japanese yen and the euro. The euro has already weakened to around 1.1500 against the dollar, while the yen has depreciated sharply, with USD/JPY climbing beyond the psychologically significant 160.00 level—moves that have fueled speculation about possible intervention by Japanese authorities.
Lee Hardman, a currency analyst at MUFG, said markets are now testing the resolve of the Japanese government to stabilize the yen, particularly after earlier statements signaled a willingness to intervene should volatility intensify.
The energy shock is also being felt across other advanced economies. Both the New Zealand dollar and the Australian dollar fell to multi-month lows after central bank officials in each country warned that a prolonged Iran conflict could weigh on domestic growth and heighten inflationary pressures.