The U.S. Dollar reached a new high on Monday, March 2, 2026, climbing 0.7% to a level not seen since early February, fueled by rising crude oil prices in the wake of U.S. And Israeli airstrikes against Iran over the weekend. The surge in the dollar reflects growing market concerns about potential inflationary pressures stemming from increased energy costs.
Traders have revised their expectations for Federal Reserve interest rate cuts, now anticipating reductions of approximately 59 basis points in 2026, down from the 61 basis points predicted on February 27th. Gareth Berry, a strategist at Macquarie Group in Singapore, suggested this shift indicates a growing belief that the Fed is less likely to lower rates if oil prices continue to climb and exacerbate inflationary pressures in the U.S.
The attacks on Iran, which resulted in the death of the country’s supreme leader, have significantly impacted global markets. The price of crude oil jumped more than 7% on Sunday, with the international benchmark Brent crude advancing 8% in initial trading, according to reports. GasBuddy analyst Patrick De Haan predicted that U.S. Gasoline prices could rise by as much as 20 cents per gallon as early as Monday evening.
The escalation of tensions likewise triggered a flight to safety, though a somewhat fractured one. While the dollar benefited from risk aversion, it was one of the few traditional safe-haven assets to gain. U.S. Government bonds, the Japanese yen, and the Swiss franc all declined in value. The S&P 500 fell 1.5% after Iran’s head of security declared that the country would not engage in negotiations with the United States.
U.S. President Donald Trump stated that the military campaign in Iran could last between four and five weeks. The potential for a prolonged disruption to oil supplies, particularly through the Strait of Hormuz – a critical waterway for global crude shipments handling approximately 21 million barrels per day – remains a key concern. Experts note that while the market can likely absorb a temporary loss of Iranian crude (Iran produces less than 3% of global supply), a prolonged blockage of the Strait of Hormuz would be far more damaging.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies announced on Sunday they would increase daily production by 206,000 barrels, a move that may offer some mitigation against rising prices. Though, analysts are skeptical that this increase will be sufficient to fully offset the potential impact of the conflict. Diversification of energy sources and the potential for increased production from Saudi Arabia are seen as factors that could help to stabilize the market, but the extent of their impact remains uncertain.
As of Monday afternoon, the Iranian government has not issued a formal response to the attacks beyond the statement from its head of security rejecting negotiations. The OPEP is scheduled to meet in the coming days to discuss further potential adjustments to oil supply.