The US Dollar Index surged to 98.75 as of March 28, 2026, after escalating US and Israeli military strikes on Iranian targets sent shockwaves through global currency markets. Safe-haven demand drove the greenback’s sharpest single-week rebound in months, with traders scrambling to price in fresh geopolitical risk.
US-Israel Strikes Escalate Iran Tensions
Military operations against Iranian infrastructure have intensified throughout March, according to Aura Group’s monthly forex outlook. The strikes represent a significant escalation in a conflict that’s been simmering since late 2025, and they’ve injected a level of uncertainty into FX markets not seen since the early days of the Russia-Ukraine war.
Crude oil prices jumped on fears that Iran could retaliate by disrupting shipping through the Strait of Hormuz, a chokepoint for roughly 20% of global oil supply. Energy-sensitive currencies — the Canadian dollar, Norwegian krone, and Australian dollar — saw sharp moves as traders recalculated commodity exposure.
FX Market Reaction Across Major Pairs
The dollar’s strength wasn’t uniform across all pairs. EUR/USD slid as European energy vulnerability came back into focus. Japan’s yen, typically a safe-haven play, saw mixed flows as the Bank of Japan’s policy stance complicated its traditional role.
According to Aura Group, the DXY spike to 98.75 followed the initial wave of strikes, with the index holding gains as markets digested ongoing military developments and their potential impact on global oil supply chains through the Strait of Hormuz.
Emerging market currencies bore the heaviest losses. The Turkish lira and South African rand both weakened against the dollar, reflecting heightened risk aversion and capital flight toward US Treasuries. Oil-importing nations face a double hit: costlier energy bills and tighter dollar liquidity.
Outlook for Forex Volatility
Traders are now watching two variables closely: Iran’s response and OPEC’s supply decisions. Any disruption to Hormuz transit — even a partial one — could push Brent crude above $100 and extend the dollar rally further. Central banks in commodity-importing nations may face pressure to intervene if their currencies weaken too quickly.
The conflict’s trajectory remains uncertain. A diplomatic off-ramp would likely trigger a sharp unwinding of safe-haven positions, but military escalation could entrench the dollar’s gains well into Q2 2026.
Beatrice Quinn, Senior Forex Analyst at PipPenguin: “The DXY move to 98.75 reflects genuine fear, not speculation. Markets are pricing in a sustained period of elevated oil risk, and that changes the calculus for every central bank holding dollar reserves. Until there’s clarity on Hormuz shipping lanes, expect the greenback to stay bid and risk currencies to remain under pressure.”
About Author
