Dollar gains as Mideast war fuels safe-haven demand

The US currency delivered its strongest quarterly performance since late 2024, with the Dollar Index climbing 1.43% in the first three months of the year. Geopolitical tensions across the Middle East—particularly the joint US-Israeli air offensive on Iran and Tehran’s retaliatory drone and missile strikes—triggered a flight to safety among global investors. Rising oil prices and concerns over energy supply security have also forced markets to reassess central bank policies, with many now expecting a prolonged period of tight monetary stance.

Dollar breaks key levels against major currencies

The US Dollar Index briefly crossed the 100 threshold for the first time since November 2025 before settling at 99.7 at quarter’s end. Against the euro, the greenback strengthened sharply, with the EUR/USD pair closing at 1.1554—a 1.7% drop for the single currency. The euro also touched 1.1411, its weakest level since August 2025. The dollar gained 0.8% against the Swiss franc and climbed 1.2% versus the Japanese yen, briefly rising above 160 yen for the first time since July 2024.

Analyst view and Türkiye’s position

Jane Foley, senior FX strategist at Rabobank, noted that investors prioritize liquidity over returns during turbulent periods, reinforcing the dollar’s safe-haven role. “Demand for the dollar rises quickly during crises because of its central role in global trade and payment systems,” she said, adding that recent developments have eased doubts about whether the dollar had lost its status as a refuge currency. Further escalation in the Middle East would likely continue to support the greenback, she warned. For Türkiye, a stronger dollar typically increases the cost of energy and commodity imports, adding pressure to the current account balance. Ankara continues to advocate for de-escalation in the Gulf region while managing the economic spillovers of a prolonged conflict.