The US dollar has regained its position as a preferred safe-haven asset since the outbreak of the Iran war, reversing a period of weakness and outperforming traditional alternatives such as gold and the Swiss franc.
Amid rising geopolitical tensions and uncertainty in global markets, investors have turned back to the dollar, driving it higher against most major currencies. According to Marc Chandler, chief market strategist at Bannockburn Global Forex, the currency’s recent performance has restored confidence in its traditional role. “Many people had questioned the dollar’s role as a safe haven, and its performance in the war has now resuscitated it,” he said.
The rebound follows a year in which the dollar weakened due to uncertainty over US trade policies and expectations of lower interest rates. During that period, investors diversified into other assets, including gold. However, the escalation of conflict involving Iran, coupled with rising oil prices, has shifted market expectations. Higher energy costs have raised concerns about inflation, reducing the likelihood that the Federal Reserve will cut interest rates and boosting the appeal of the dollar.
Gold, often seen as a safe haven, has experienced sharp volatility. After rising during the dollar’s decline, it has fallen by about 15 percent since the conflict intensified, with analysts pointing to profit-taking and reports of central bank selling. Meanwhile, the Swiss franc has also weakened, dropping roughly 3.5 percent over the same period.
Across major currencies, the dollar has strengthened broadly. All G10 currencies have declined by more than 1 percent against the dollar in the past month. The British pound has performed relatively better, falling 1.4 percent, followed by the Canadian dollar at 1.7 percent and the Norwegian krone at 2.3 percent. Analysts note that oil-exporting countries have received some support from higher energy prices, limiting their losses.
Emerging market currencies have also come under pressure. While many have declined sharply, a few have bucked the trend. The Colombian peso has been the strongest performer, rising 2.3 percent, supported by political developments and the country’s status as an oil exporter. The Argentine peso has also gained about 1.8 percent. Meanwhile, the Chinese renminbi has remained relatively stable, down just 0.7 percent, reflecting Beijing’s efforts to manage its currency despite global volatility.
At the other end of the spectrum, the South African rand has fallen nearly 7 percent, making it the worst-performing emerging market currency, followed by the Russian ruble, which has dropped about 5.6 percent.
The dollar index, which measures the currency against a basket of major peers, has risen more than 2.5 percent since the conflict began. Analysts say the US position as a major energy producer has also supported the currency’s strength.
For investors seeking stability, short-term US Treasury bills and money market funds have become attractive options. John Briggs of Natixis Corporate & Investment Banking said such instruments offer a reliable place to hold funds during uncertain times, as they provide predictable returns while markets remain volatile.
The dollar’s resurgence highlights how quickly investor sentiment can shift during geopolitical crises, reinforcing its central role in the global financial system.
