The U.S. dollar staged a sharp comeback after American strikes on Iran, calming investors who had begun to question whether the greenback still commanded its traditional safe-haven status. As geopolitical tensions intensified in the Middle East, global markets slipped into risk-off mode and the dollar responded the way it historically has during crises.
The dollar index climbed nearly 1% on Monday, marking its strongest single-day performance in seven months, according to a Reuters report. The rally was broad-based, with the greenback gaining against major peers as investors sought safety amid fears of further escalation.
The rebound comes after months of scepticism about the dollar’s crisis-era appeal. That doubt had taken hold last year when the currency failed to strengthen during a tariff-driven global sell-off triggered by Washington’s sweeping trade measures announced on April 2, 2025, an event that market participants had dubbed “Liberation Day”. During that episode, the dollar’s muted response raised concerns that its reflexive safe-haven bid might be weakening.
This time, however, the script appears different. Analysts told Reuters that the depth and liquidity of U.S. financial markets remain a decisive advantage. In periods of acute stress, the U.S. Treasury market is seen as the only venue capable of absorbing massive global flows. When investors rush into Treasuries, demand for the dollar naturally follows.
The lack of viable alternatives also bolstered the currency’s appeal. While the euro, the yen and gold attracted safe-haven interest in recent months, the scale and accessibility of U.S. markets make it difficult for global investors to sidestep the dollar entirely during large-scale de-risking, investment managers said.
Why the Dollar Stumbled Before Market participants believe last year’s unusual weakness in the dollar during turbulence stemmed from the origin of the risk itself. Because the shock was generated by U.S. policy, namely aggressive tariff measures, investors were reluctant to seek refuge in the very currency linked to the uncertainty. Analysts noted that the episode temporarily dented the dollar’s central role in global finance, encou
Read More