USD: BBH Highlights Data and Risk Aversion Trends

US Military Action Spurs Dollar Rally Amid Market Turmoil

Elias Haddad of Brown Brothers Harriman observes that the recent US-led strikes against Iran have triggered a classic flight to safety, sending the US Dollar higher and putting pressure on global stock markets. He points out that, aside from geopolitical tensions, the future path of the Dollar and risk assets will be shaped by upcoming US employment figures and the release of the February ISM manufacturing data later today.

Market Reaction: Risk Aversion and Asset Movements

Financial markets have shifted into risk-off mode as investors brace for the wider consequences of the US military campaign targeting Iran. The Dollar has strengthened broadly, equities worldwide are under pressure, gold prices have jumped over 4%, and Brent crude oil has surged by as much as 13%. Yields on major government bonds have also risen, as the spike in oil prices has heightened inflation expectations, overshadowing the usual safe-haven demand for bonds.

Geopolitical Uncertainty and Market Outlook

President Donald Trump announced that US military operations against Iran could continue for up to four or five weeks if needed. Prolonged conflict is likely to deepen uncertainty and make recent market trends more persistent. However, if the offensive weakens or topples the Iranian regime, risk assets could recover swiftly.

Key Data Releases to Watch

Looking beyond geopolitical developments, the trajectory for the Dollar and risk-sensitive assets will largely depend on this week’s US jobs report.

Today’s focus is on the February ISM manufacturing index, scheduled for release at 3:00pm London time (10:00am in New York). The main index is expected to come in at 51.5, down from January’s 52.6. Investors should closely monitor the Prices Paid and Employment components for indications of whether the tension between job growth and inflation is easing or intensifying.

(This report was produced with assistance from an AI tool and subsequently reviewed by an editor.)