At the start of March 2026, the US dollar is staging an impressive rally, finding itself at the center of a global "flight to safety." Escalation in the Middle East, the effective blockade of the Strait of Hormuz, and a repricing of Fed policy expectations have created perfect conditions for the US currency to strengthen as the primary safe-haven asset.

The US dollar index (USDX) jumped by nearly 1.5% over two days early in the week, briefly reaching 99.65. On March 4, the index is consolidating in the 98.70–99.30 area, preparing for a breakout of the key resistance zone at 99.00 (EMA200 on the daily chart)–100.00.

Key factors: perfect storm for US dollar

Geopolitical shock and safe-haven status

Escalation in the US–Israel–Iran confrontation has reached a critical point. After coordinated strikes on Iranian targets over the weekend and the reported death of the supreme leader, Tehran responded with attacks on US bases in the region. A critical development was the de facto closure of the Strait of Hormuz, through which about 20% of global oil shipments transit.

US President Donald Trump said the Navy would offer escort protection for ships in the Persian Gulf and would accompany tankers through the strait as necessary. The IRGC, however, has confirmed it retains control of the strait.

2. Oil shock and inflation expectations

WTI has jumped above $76.50/bbl (+2% on the day), while Brent is approaching $83.00. Oil market analysts warn that in a negative scenario, crude could reach $120–$150/bbl, which would rapidly accelerate inflation even as the economy slows — as discussed in our review "XAU/USD: why gold trades lower amid war in Middle East instead of growing."

3. Hawkish reversal in Fed rate expectations

Rising energy prices are radically changing the market's view on monetary policy. The CME FedWatch tool shows a 97% probability of interest rates being held at the March meeting.

At the same time, economists warn that the recent 2% two-session spike in USDX looks overheated and that technical resistance around the psychological 100.00 level may prove strong.

Brief technical analysis

The USDX is testing a critical resistance area that ties together the highs and lows since February 2023.

Key resistance: 99.40 (EMA50 on the weekly chart)–100.00. A break above this zone opens the way to 101.00 (EMA200 on the weekly chart), and on its breach — to 102.00 and 105.00.

Key support: 98.12 (EMA200 on the 1-hour chart), then 97.84 (EMA200 on the 4-hour chart)–97.00, and 96.85 (EMA200 on the monthly chart). A break below would return the index to a global bear market zone.

Outlook: what's next?

The USDX has traded in the 96.20–100.30 range since mid-2025 despite a string of global shocks.

Short-term scenario

Near-term dollar dynamics will be driven by three factors:

Development of the Middle East conflict. President Trump's comments about a possible 4–5-week military campaign point to a potentially protracted crisis.
US macro data. Today's calendar features the ADP private sector payrolls report (consensus: +50k) and the ISM services PMI.
Inflation expectations. The ISM Prices Paid component will be a key indicator of price pressure.

Medium-term risks

Economists warn of possible structural shifts:

Prolonged military confrontation could slow the global recovery
Rising gasoline prices in the US (a gallon has already climbed to $3.00 and could rise further amid escalating tensions) raise political stability risks ahead of midterm elections
The Fed may be forced to choose between fighting inflation and supporting growth

Conclusion

The US dollar is undergoing a decisive test. The geopolitical shock in the Middle East, the Strait of Hormuz blockade, and a repricing of Fed rate expectations have created a strong tailwind for the currency. However, technical resistance in the 99.40–100.40 area and growing stagflation risks may limit upside potential.

The coming days are critical: a break above 100.00 would open the path to multi-month highs, while failure at that level would return the dollar to the 96.00–98.00 consolidation range. Volatility is expected to remain high in any scenario, and investors should closely monitor geopolitical developments and Fed signals on the policy path.

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