US Dollar Index Strengthens Near 99.00 Amid Middle East Tensions and Strong US Services Data
Date: March 5, 2026
Source: FXStreet
In early European trading hours on Thursday, the US Dollar Index (DXY) climbed to approximately 99.00, bolstered by escalating geopolitical risks in the Middle East and robust economic data from the US services sector.
Geopolitical Concerns Fuel Safe-Haven Demand
Heightened tensions in the Middle East have intensified safe-haven flows towards the US dollar. Israel announced new military strikes targeting not only Iranian locations but also what it identified as Hezbollah infrastructure in Beirut. In response, Iran denied claims that it had communicated with the United States regarding the ongoing conflict. Tehran further emphasized its preparedness for a prolonged conflict rather than negotiations, signaling a potentially extended period of unrest in the region.
These developments have heightened fears of a protracted war in the Middle East, leading investors to seek security in the greenback. This flight to safety supports the US Dollar Index’s upward momentum against a basket of six major world currencies.
US Services Sector Shows Strong Growth
Adding to the dollar’s strength, the US service sector demonstrated significant expansion in February. The S&P Global Services Purchasing Managers’ Index (PMI) rose to 56.1, a 3.5-year high, exceeding market expectations of 53.5 and improving markedly from January’s 53.8. The data indicates resilient economic activity in the US, reinforcing confidence in the domestic economy.
This positive economic backdrop is likely contributing to the Dollar Index’s gains as traders anticipate stable monetary policy amidst strong growth signals.
Federal Reserve Outlook
Market participants broadly expect the US Federal Reserve to maintain its current interest rate levels through the summer. Despite President Donald Trump’s prior calls for rate reductions, the Fed appears poised to prioritize economic stability given the solid service sector performance and geopolitical uncertainties. Monetary policy decisions will remain a key influence on the dollar’s trajectory going forward.
Background on the US Dollar Index
The US Dollar Index measures the value of the US dollar against six major global currencies, providing a broad indication of the dollar’s international strength. Factors such as monetary policy, geopolitical events, and macroeconomic data influence the index’s movements. Historically, the dollar serves as a global reserve currency and a preferred haven in times of global uncertainty.
Summary
Amid renewed tensions in the Middle East and stronger-than-expected US services sector growth, the US Dollar Index has gathered momentum, nearing the 99.00 level. Geopolitical risks are driving demand for the dollar as a safe-haven currency, while resilient economic data underpins confidence in the US economy. Going forward, traders will closely watch developments in the Middle East and Federal Reserve policy signals for cues on the dollar’s direction.
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Reporting by Lallalit Srijandorn, FXStreet
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