Dollar Strengthens Amid Iran Conflict with Yen at 20-Month Low
By Rocky Swift, March 13, 2026
TOKYO — The U.S. dollar surged to its highest level in over three months on Friday, marking its second consecutive weekly gain since the onset of the conflict in Iran. Market turmoil stemming from escalating geopolitical tensions has bolstered the dollar’s reputation as a safe-haven currency, even as oil prices climb and other major currencies falter.
The euro fell to its lowest against the dollar since November 2025, while the Japanese yen dropped to a 20-month low, prompting warnings from Japanese officials about potential intervention to stabilize the currency.
Market Dynamics Amid Conflict and Energy Concerns
The dollar index, which tracks the greenback against a basket of major currencies, rose 0.16% to 99.83, positioning it for an approximate 1% gain this week. The euro dipped slightly by 0.08% to $1.1501 — a level unseen since late November. Sterling also declined 0.08%, trading at $1.333. Meanwhile, the yen slid to 159.69 per dollar, the weakest level since July 2024. The resurgence of the dollar is partly attributed to its safe-haven appeal during uncertain times. Additionally, the U.S.’s status as a net energy exporter amid surging oil prices has provided further support for the greenback. The International Energy Agency (IEA) recently announced an unprecedented release of 400 million barrels of strategic oil reserves to calm tightening energy markets, while the U.S. issued a 30-day waiver allowing certain countries to buy Russian petroleum products previously subject to sanctions.
In the backdrop, Iran has intensified attacks on oil and transportation infrastructure throughout the Middle East. Iran’s newly installed Supreme Leader, Mojtaba Khamenei, has vowed to keep the strategic Strait of Hormuz shipping lane closed, exacerbating concerns over global energy supplies and further unsettling markets.
Japan Signals Readiness to Act on Yen Decline
Japanese Finance Minister Satsuki Katayama expressed readiness to take necessary measures to address the yen’s depreciation, highlighting close communication with U.S. authorities on foreign exchange matters. The yen’s decline presents a particular challenge for Japan, which imports significant amounts of energy and is thus disproportionately impacted by rising crude costs.
Analysts at IG Markets note that the yen’s previous “line in the sand” at 160 per dollar appears to be shifting, with intervention efforts viewed cautiously amid a challenging global macroeconomic landscape marked by high inflation and slowing growth.
Broader Market Implications and Central Bank Watch
The ongoing conflict in the Middle East, following U.S. and Israeli airstrikes that killed Iran’s former supreme leader, continues to destabilize global markets. The Trump administration has reportedly expended large quantities of critical munitions since hostilities began, and recent incidents, such as the crash of a U.S. military refueling aircraft in Western Iraq, underscore the conflict’s volatility.
Investors are closely watching upcoming central bank meetings in the U.S., Europe, and Japan. Market expectations have shifted, with anticipation that the European Central Bank could raise interest rates as early as June, while the U.S. Federal Reserve might delay cutting rates until December, beyond previous projections for a July reduction.
Other currencies have also experienced pressure: the Australian dollar weakened by 0.18% to $0.7061, and New Zealand’s kiwi fell 0.44% to 58.28 cents against the dollar.
In contrast, cryptocurrencies saw modest gains, with Bitcoin climbing 1.90% to $71,527.50 and Ether rising 2.23% to $2,109.03 as investors seek alternative assets.
Outlook
Gavin Friend, senior markets strategist at National Australia Bank in London, summarized the prevailing market sentiment: "The market’s focus has shifted from diversification to inflation and slower growth. The toxic mix of higher inflation and lower economic growth will persist as long as the crisis continues."
With geopolitical tensions unlikely to dissipate soon, the dollar’s role as a safe haven is expected to remain intact, while currencies of energy-importing nations, particularly Japan’s yen, face continued downward pressure.
Reporting by Rocky Swift in Tokyo; editing by Lincoln Feast.