By Renae Dyer
The dollar and Swiss franc rose sharply Monday as strikes across the Middle East encouraged investors to seek safe-haven assets.
President Trump and Israel launched military attacks on Iran at the weekend, killing a large number of Iran's top leaders including Supreme Leader Ayatollah Ali Khamenei. In response, Iran launched strikes across the Middle East.
The DXY dollar index rose to a five-week high of 98.566 in early European trade. The euro fell to 0.9032 Swiss francs, its lowest level since the Swiss National Bank removed its peg for the two currencies in 2015, according to LSEG data.
"The dollar typically benefits in wartime situations because it is the world's reserve currency," Commerzbank foreign-exchange analyst Thu Lan Nguyen said in a note.
A substantial share of cross-border loans and bonds are denominated in dollars. To ensure liquidity at any time, demand for the dollar therefore rises in times of uncertainty, she said.
Rising oil prices in response to the conflict also lifted the dollar. The U.S. is a net exporter of oil so higher crude prices improve the country's terms of trade. Moreover, higher oil prices increase the risk that inflation remains elevated, reducing the prospect of further interest-rate cuts by the Federal Reserve.
The franc strengthens in times of uncertainty as it is the ultimate safe-haven currency, Nguyen said.
"The fact that the franc is currently benefiting in particular is due to the erosion over the past year of the status of other traditional safe havens--most notably the dollar, because of erratic policy from the White House, and the Japanese yen, due to growing fiscal concerns."
The Swiss National Bank's scope to weaken the franc is also limited as its policy rate is already at zero and forex interventions are likely to be used sparingly, she said.
The SNB is reluctant to inflate its balance sheet with additional forex reserves, while Trump has an aversion to interventions aimed at weakening a currency.
The timing and scale of the conflict might have caught many off guard, Ebury's head of market strategy Matthew Ryan said in a note.
However, the immediate fallout could be relatively contained given risk premium was already partly embedded into markets and the attacks were launched while markets were closed, he said.
"That said, risk-off trading is likely to dominate for now."
The stronger dollar dragged the euro to a five-week low of $1.1697 in early European trade, LSEG data showed.
The rise in oil prices also bolstered the krone as Norway is a major oil exporter. The euro fell to a two-and-a-half-year low of 11.1358 kroner.
Write to Renae Dyer at renae.dyer@wsj.com
(END) Dow Jones Newswires
March 02, 2026 04:31 ET (09:31 GMT)
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