The American currency is on course for its best monthly showing since July 2025. The military conflict in the Middle East and the subsequent oil shock have completely upended Wall Street's scenarios, forcing the largest investment banks to urgently revise their forecasts for the primary reserve currency.

The Bloomberg Dollar Spot Index, which tracks the dollar's performance against a basket of major global currencies, soared by more than 2% in March. This unprecedented strengthening was driven by a mass flight of global investors to safe-haven assets and a sharp decline in expectations regarding an imminent cycle of interest rate cuts by the US Federal Reserve.

This represented a dramatic turn for the market. Just before the onset of hostilities, the dollar was experiencing its fourth consecutive monthly decline. The protracted geopolitical conflict caught investment banks and traders off guard, as they had been aggressively betting on further weakening of the American currency until the last moment.

A notable example is the reaction of strategists at JPMorgan Chase & Co., who officially changed their dollar forecast to bullish for the first time in a year. In the futures market, speculators also moved swiftly to close short positions and switch to long ones, despite holding their bearish trades at near five-year highs just mid-February. It is noteworthy that in January, financial giants like Goldman Sachs and Deutsche Bank entered 2026 with confident forecasts for a weaker dollar, solely based on anticipated easing of the Fed's monetary policy.

Analysts remind us that in 2025, the US dollar index lost about 8%. At that time, demand for the currency was undermined not only by three consecutive Fed rate cuts but also by Donald Trump’s aggressive tariff war. This sparked rumors of potential capital flight from dollar assets. However, paradoxically, investors continued to purchase American securities while actively hedging currency risks.

Currently, many investment firms prefer to refrain from updating their macro forecasts altogether. The dense fog of uncertainty regarding the duration of the war, risks of further escalation, and prospects for a peace agreement is prompting Wall Street to take a pause in its assessments.