The U.S. dollar and cryptocurrencies have emerged as unexpected winners during the Iran conflict, while traditional safe-haven assets such as gold and Treasurys have underperformed.
The shift follows U.S. and Israeli strikes on Iran from Feb. 28, with elevated oil prices above $100 per barrel driving inflation concerns and reshaping investor behaviour.
“This is what happens when you have a conflict that triggers stagflation risk: It becomes difficult to trade it,”
Said ITC Markets strategist, Daniel Tenengauzer.
Rising inflation expectations have triggered a selloff in U.S. government bonds, pushing Treasury yields to their biggest two-week increase in nearly a year and reducing demand for fixed-income assets.
The stronger macro backdrop has also lifted the U.S. dollar, with the ICE Dollar Index climbing more than 2% this month as markets scale back expectations for Federal Reserve rate cuts.
Meanwhile, cryptocurrencies have gained ground, with Bitcoin rising about 3.1% to $73,770 and Ethereum up 7.9% to $2,298, outperforming a 2.7% decline in the S&P 500.
Stephen Innes of SPI Asset Management said policymakers may now prioritise inflation risks from an energy shock, reinforcing dollar strength and complicating the outlook for traditional safe-haven assets.
At the time of reporting, Bitcoin price was $74,397.73.