Dollar dominance is surviving the Iran war - just about

20 Apr 2026 10:15 AM

EXPERT COMMENT

The war doesn’t seem to have damaged the dollar’s global status. But that may reflect the US’s emergence as the top producer of oil, gas and weapons, which insulates its economy from the crisis.

A central characteristic of the dollar’s role as the world’s pivotal currency is that the US bond market, and the greenback itself, act as safe havens in times of stress.

As anxiety levels rise during a crisis, institutional investors and governments flock to dollar-denominated assets because US capital markets are easier to trade in and out of than any others; and because the ability of the Federal Reserve to act as lender and liquidity-provider of last resort is second to none. 

In the end, it is US trustworthiness that underpins all this. But since global trust in the US seems to be eroding, both before and during this year’s war on Iran, it is worth asking whether the dollar’s safe-haven status is showing any signs of ill-health.

The quick answer is no, but it would be wrong to conclude that all is well, for two reasons. In the first place, the performance of US asset prices may say less about the dollar’s status than it does about the relative insulation of the US economy from the crisis.

And second, China’s capital markets are emerging really very well from the current crisis, which might give Washington some pause for thought.

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