Dollar options show strongest bullish sentiment since 2022, as ongoing conflict sustains high oil prices

Dollar Strengthens Amid Ongoing Iran Conflict

According to options market data, the US dollar (DX-Y.NYB) is poised to reach a new peak for 2026, as tensions in Iran continue to drive up energy prices.

Early trading in London saw the Bloomberg Dollar Spot Index climb by up to 0.3%, putting it on track for its highest closing value in nearly two months. Options traders are wagering that the dollar could surpass levels last seen in December.

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One-month risk reversals, which reflect the difference in demand for bullish versus bearish dollar options against major currencies, surged to 92 basis points—the highest since late 2022.

This shift follows Brent crude oil’s return above $100 per barrel. Oman has evacuated all vessels from its main export terminal near the Strait of Hormuz, and two tankers have been targeted in Iraqi waters.

Rising oil prices can quickly fuel inflation in the United States, making it less likely that expectations for interest rate cuts will turn dovish in the near term.

Goldman Sachs economists Manuel Abecasis and David Mericle forecast that Brent crude will average $98 in March and April, then drop to around $71 by the fourth quarter. They anticipate this will push inflation higher, delaying the Federal Reserve’s first rate cut of the year from June to September.

This scenario suggests that wider interest rate gaps will persist, a trend that typically supports the dollar—especially against countries that import energy and face worsening trade conditions. As oil prices influence broader economic trends, the dollar’s role as a so-called petrocurrency is reinforced.

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