Dollar Heads for First Weekly Gain in Three Weeks as U.S.-Iran Standoff Fuels Safe-Haven Demand

The U.S. dollar was on track for its first weekly gain in three weeks on Friday, driven by persistent safe-haven demand as tensions between Washington and Tehran showed no signs of easing. Investors continue to seek refuge in the greenback amid concerns over disruptions to global energy supplies through the Strait of Hormuz.

By 09:49 GMT on Friday, the U.S. dollar index, which measures the greenback against a basket of six major currencies, was trading broadly unchanged at 98.80. The euro remained flat at $1.1686, while the British pound edged up 0.1% to $1.3483 against the dollar.

Market participants have been flocking to the U.S. dollar as a relative safe haven, attracted in part by America’s position as a major energy exporter. This status could help insulate the country from potential energy shocks caused by the effective closure of the Strait of Hormuz, a critical waterway for global oil shipments.

Markets feared that a swift resolution to the Iran conflict appeared increasingly unlikely. While the United States indefinitely extended a ceasefire with Iran earlier this week, Tehran continued to attack commercial vessels in the strategically vital Strait of Hormuz. Meanwhile, Washington has been seizing ships attempting to run its naval blockade in the region.

U.S. President Donald Trump said on Thursday that he was in no rush to end the conflict with Iran, even as Israel and Lebanon agreed to prolong their ceasefire by an additional three weeks. Trump’s comments suggested that the standoff could persist for an extended period, further supporting safe-haven currency flows.

The dollar’s strength comes despite broader concerns about the economic impact of sustained tensions in the Middle East. Energy markets have been particularly volatile, with oil prices surging on supply disruption fears. The potential for an energy shock has created a complex dynamic where the dollar benefits from safe-haven flows while other currencies face pressure.

Most Asian currencies weakened against the dollar during Friday’s trading session. The Japanese yen was among the currencies that fell despite new economic data that showed consumer inflation in Japan picked up more than expected in March. The inflation figures came in hotter than forecast, but markets remained convinced that the Bank of Japan would not raise interest rates at its policy meeting scheduled for next Tuesday.

The yen’s weakness reflects investor expectations that Japanese monetary policy will remain accommodative even as inflation continues to rise. This divergence in monetary policy expectations between Japan and the United States has contributed to yen weakness against the dollar in recent sessions.

Currency analysts noted that the dollar’s status as both a safe-haven asset and the currency of a major energy exporter has created particularly favorable conditions for the greenback. This dual support has helped the dollar maintain its strength even as some traders expressed concerns about the broader economic implications of extended Middle East tensions.

The standoff has also raised questions about global trade flows and supply chain disruptions. The Strait of Hormuz is one of the world’s most important oil chokepoints, with roughly one-fifth of global oil consumption passing through the narrow waterway. Any sustained disruption could have significant implications for global energy markets and economic growth.

Looking ahead, currency markets will continue to monitor developments in the U.S.-Iran standoff closely. The dollar’s near-term direction will likely depend on whether tensions escalate further or move toward de-escalation. For now, the combination of geopolitical uncertainty and America’s energy export advantage appears to be supporting continued dollar strength as the week draws to a close.

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