Contrary to media reports, the Iran war has not prompted markets to flee to the financial sanctuary of the world’s reserve currency. Does this mean the conflict might end soon?
Since the US-Israeli war against Iran began on 28 February, stocks in the US, Europe, and Asia have plummeted, bond yields have jumped, and currencies across the world have tumbled – with one notable exception.
The US dollar index, which tracks the greenback against a basket of six major currencies, has risen by just under 3% since the end of last month. The dollar’s surge against the euro has been especially emphatic, at just below 3.5%.
Many saw this as evidence that markets were once again rushing to the safety of the world’s reserve currency. This was entirely typical before Donald Trump’s erratic trade policy, attacks on the Federal Reserve’s independence, and general volatility led investors to question the US financial system’s credibility.
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