March 02, 2026 – The U.S. dollar rallied sharply on Monday. Investors poured into safe-haven assets after U.S. and Israeli airstrikes targeted Iran. The strikes killed Supreme Leader Ayatollah Ali Khamenei. His death was confirmed by Iranian state media. The power vacuum now threatens a prolonged conflict in the Middle East.
Oil Prices Drive the Dollar Higher
Oil prices surged roughly 9% in early trading. Disruptions to seaborne trade near the Strait of Hormuz fueled the spike. Iran’s Revolutionary Guard struck three U.S. and British oil tankers in retaliation. Blasts were also reported over Dubai and Doha. Barclays analysts estimate the dollar gains 0.5% to 1% for every 10% rise in oil. That asymmetry gives the greenback a structural edge during energy shocks. The U.S. remains a net crude exporter. Europe and Japan rely heavily on oil imports.
Euro and Yen Bear the Brunt
The dollar index climbed 0.68% to 98.31. It briefly touched 98.566, the highest since late January. The euro fell 0.3% to $1.1781. Europe faces a double challenge: rising energy costs and record-low gas storage ahead of refill season. The Swiss franc surged 0.6% against the euro, hitting its strongest level since 2015. The Swiss National Bank signalled readiness to intervene in currency markets.
The yen weakened 0.2% to 156.235 per dollar. Japan’s heavy dependence on oil imports offset initial safe-haven gains. Morgan Stanley MUFG analysts noted the Bank of Japan will likely delay rate hikes. Rising uncertainty in the Middle East reduces the probability of near-term policy tightening.
Asia-Pacific Currencies Under Pressure
China’s offshore yuan dropped 0.25% to 6.8861 per dollar. The People’s Bank of China weakened its daily fixing to manage appreciation pressures. Beijing imports significant volumes of Iranian crude. That makes the yuan especially vulnerable to supply disruptions in the Middle East. The Australian dollar fell as much as 1.2% before paring losses.
What Comes Next
Markets now face deep uncertainty. President Trump told the Daily Mail the campaign could last four weeks. BNZ strategist Jason Wong captured the mood plainly. The key unknowns are how high oil prices will rise and how long the Strait of Hormuz remains disrupted. Until those questions are answered, the dollar’s safe-haven premium is likely to persist. Energy-importing economies face the steepest risks ahead.
