Dollar Hits 10-Day High Amid Middle East Escalation
The Bloomberg spot dollar index rose to its highest since April 13 as hopes for a quick end to the conflict fade. All G10 currencies weakened against the dollar, which is in demand as a safe haven, as oil prices climbed above $107 per barrel for Brent.
Dollar Against All: How Oil and War Reshaped Global Capital Flows
Introduction
On April 24, 2026, an event occurred that analysts would call a "point of no return" for global currency markets. The Bloomberg spot dollar index jumped 0.3%, hitting a 10-day high — the last time the dollar was this strong was on April 13, at the height of the previous panic wave.
All G10 currencies without exception weakened against the US currency. The New Zealand dollar fell the most, while the Japanese yen and Swiss franc — traditional safe havens — also lost ground. Bitcoin, the so-called "digital gold," remained stuck in consolidation around $78,000, failing to act as a safe haven.
Behind this move lies a simple but frightening reason: Brent crude broke above $107 per barrel for the first time since April 7. The Strait of Hormuz, through which 20% of the world's oil passes, is effectively blocked. Investor hopes for a swift end to the Middle East conflict, which had lingered after the March ceasefire announcement, have now completely evaporated.
"Oil is steadily creeping up and pulling the dollar with it," said Andrew Hazlett, currency trader at Monex Inc. "Traders believe the escalation in tensions over the past couple of days indicates that the end of the conflict is being postponed indefinitely."
Event Details and Timeline
The dollar rally was not spontaneous — it resulted from an accumulation of factors that reached a critical mass in April 2026.
Oil Shock as a Trigger
On April 23, oil prices surged sharply. Brent futures traded at $107.33 per barrel by 8:47 PM Moscow time — a 5.32% gain for the session. WTI jumped to $98.35.
The reason is not just geopolitics, but a real threat of shortage. About 20% of global oil and gas supplies pass through the Strait of Hormuz, along with a third of global nitrogen fertilizer trade and half of sulfur supplies for phosphate fertilizers. According to CNN, due to the tense situation in the strait, about 20,000 sailors and 2,000 vessels carrying approximately 132 million barrels of oil remain blocked.
From Ceasefire to "Vacuum"
The timeline shows how quickly the rhetoric changed:
March 2026 — The US and Iran announce a temporary ceasefire. The dollar slightly loses ground; investors breathe a sigh of relief.
April 17 — Iran states that the Strait of Hormuz is open to commercial vessels until April 26–27, but only with permission from the IRGC Navy. Passage of warships is prohibited. This creates legal uncertainty that markets hate.
April 22 — Iran activates Tehran's air defense systems. Talks in Oman hit a deadlock.
April 23 — Donald Trump writes on Truth Social an order to strike any vessels seen laying mines. Simultaneously, reports emerge of Iran seizing two container ships.
April 24 — The dollar hits a high; Brent breaks above $107. As journalist Emil Mirsaev put it, "The Persian Gulf found itself in a vacuum between peace and war, and the expert consensus is that we are in for continued hostilities."
Numbers That Speak for Themselves
| Indicator | Before Escalation (April 7) | April 24, 2026 | Change |
|---|---|---|---|
| Brent, $/bbl | ~$95 | $107.33 | +13% |
| WTI, $/bbl | ~$86 | $98.35 | +14% |
| Bloomberg Dollar Index | Base | +0.3% (high since Apr 13) | 10-day peak |
| Yen (USD/JPY) | ~147 | ~150 | Weakening |
Impact and Significance (for the World / Industry / Society)
For the World: Death of the "Soft Landing"
Until February 2026, global markets priced in an optimistic scenario: slowing inflation, Fed rate cuts in the second half of the year, and steady economic growth. The Hormuz crisis destroyed that consensus.
As ING's head of global markets Chris Turner noted, "A stagflationary shock was not part of these plans." The combination of falling GDP and rising inflation — stagflation — is the worst-case scenario for central banks. The Fed can neither cut rates (which would fuel inflation) nor raise them (which would kill the economy). The result is policy paralysis.
The dollar benefits from the fact that the US economy is less dependent on energy imports than Europe or Asia. The US is now a net exporter of energy resources and imports only 17% of its needs — a 40-year low, emphasized Jean-François Robin of Natixis CIB.
Senior analyst at Swissquote, Ipek Ozkardeskaya, summed it up: "The main winner of the Middle East conflict is the US dollar. The US economy is likely to be more resilient to energy shocks."
For the Currency Market: Collapse of the "Short Dollar" Strategy
Just a month ago, investors held the largest bet on a weaker dollar since 2021. Everyone expected Fed rate cuts. Now those positions are being closed at a loss.
The euro came under a double blow: Europe imports most of its energy. The spread in two-year rates between the US and EU suggests that EUR/USD "should" trade around 1.14–1.17. But geopolitics and Trump's personal preferences (he wants a weaker dollar) keep the pair in a range.
Kit Juckes of Societe Generale notes that "every time the market is optimistic that further escalation is unlikely, the dollar weakens. But now everything points to the opposite."
The Japanese yen — a paradoxical loser. Traditionally, the yen is considered a safe haven. But Japan is the largest energy importer. Oil prices rising to $107 mean enormous pressure on the trade balance. Hence, the yen weakens along with the rest.
For Society: Blow to Food Security
This is not just a stock market story. The blockade of the Strait of Hormuz hits fertilizer supplies — a third of global nitrogen fertilizer volume passes through the strait.
Fertilizer shortage → rising food production costs → global food crisis. Meanwhile, energy prices are already hitting records. For households in Europe and Asia, this means heating and electricity bills will continue to rise, and store shelves will empty.
Reaction of Key Players
Fed and US Treasury
The Fed is caught in a trap. On one hand, the oil shock fuels inflation through higher gasoline prices. On the other, the slowdown in the global economy due to expensive energy reduces demand. According to analysts at Finam, the yield on 10-year US Treasuries rose to 4.1% from 3.96% a week earlier — investors demand a higher premium for inflation risk.
The Treasury is likely trying to offset the effect through currency interventions, but no official statements have been made yet.
Institutional Investors
Hedge funds are massively closing short dollar positions. As noted by Reuters, earlier in 2026 this strategy was one of the most popular — betting that the Fed would start cutting rates and the dollar would weaken. Now those positions are "under pressure."
Pension funds are shifting into dollar assets and US Treasuries, which are perceived as the "last bastion" of stability.
Large banks (Bank of America, Monex Inc.) report increased demand for the dollar from both corporate clients (hedging currency risks) and speculators.
Traders and Analysts
Andrew Hazlett (Monex Inc.) states: "Traders believe the escalation indicates that the conflict is being postponed indefinitely."
At Societe Generale, they maintain a more nuanced view: geopolitical risks and uncertainty in US policy offset fundamental economic indicators, so EUR/USD will remain in a range, but with a risk of sharp moves.
Forecast and Conclusions
Analysis of the current situation allows us to identify three scenarios, each with different probabilities.
Scenario A: Baseline Escalation (60% probability) — Dollar continues to strengthen, oil $100–110
This is the most likely scenario over the next 2–4 weeks. Talks have stalled, and the ceasefire regime expires on April 26–27.
- Brent crude will remain in the $100–110 range.
- Dollar will continue to strengthen moderately.
- Euro will fall to 1.10–1.12.
- Yen will remain weak (USD/JPY above 150).
Scenario B: Hard (Escalation into Hot Phase) — Dollar surges, oil $120+
Probability 25%. If a direct military strike on Iranian nuclear facilities or a full blockade of the strait with ship sinkings follows, markets will enter panic mode.
- Brent could soar to $120–130.
- Dollar will strengthen against all currencies, including commodity currencies (Australian, Canadian dollars), which usually benefit from rising raw materials. This time, raw materials are expensive, but risks outweigh.
- Stock markets will crash 10–15% (S&P 500 likely to fall below 4800).
Scenario C: Soft (Diplomatic Breakthrough) — Dollar retreats, oil falls (15% probability)
If the US and Iran reach a sudden agreement (e.g., Tehran agrees to an indefinite suspension of its nuclear program and asset unfreezing), oil could collapse back to $80–85, and the dollar could weaken sharply.
In this scenario, the bet on a weaker dollar would pay off handsomely. But for now, the news flow does not support such optimism.
What Should an Investor Do
In conditions where "the dollar is the only safe haven" and all classic safe havens (yen, franc, gold) are failing, the baseline strategy:
- Increase dollar allocation in the portfolio (cash, short-term Treasuries).
- Avoid European assets, especially those with long duration.
- Oil stocks (Exxon, Chevron, as well as Russian LUKOIL, Surgutneftegas) may show gains in ruble terms, but with high risk.
For Russian investors, the situation is twofold. Rising oil should theoretically strengthen the ruble, but sanctions discounts (Russian Urals crude trades at a $20–25 discount to Brent) and capital outflows offset this effect. Experts forecast the dollar in the range of 80–90 rubles in a prolonged conflict.
Main Conclusion
The dollar's strong move to 10-day highs is not a technical bounce but a fundamental reassessment of global risks. Investors are voting for the dollar not because they love the US economy, but because all other alternatives look even worse.
As long as the threat of real war — not just informational — hangs over the Strait of Hormuz, the dollar has only one way: up. And that path, unfortunately, will be paved through fears, panic, and new oil price records.
— Editorial Team
