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📊 Safe-Haven Dollar Buying Continues Amid Middle East War — Oil Volatility Drives High Market Turbulence

📊 Safe-Haven Dollar Buying Continues Amid Middle East War — Oil Volatility Drives High Market Turbulence

■ Market Overview

Amid the ongoing military conflict between the United States–Israel and Iran in the Middle East, financial markets continue to see safe-haven demand for the U.S. dollar driven by risk aversion.

At the start of the week, the energy market took the lead, with NY WTI crude futures surging to a high of $119.48.

This triggered a sharp decline in global equity markets.
Japan’s Nikkei 225 briefly plunged by 4,200 points, reflecting a strong risk-off sentiment dominating financial markets.

However, following reports that G7 nations are discussing the release of emergency oil reserves, crude prices reversed sharply lower.

As a result, market dynamics temporarily shifted from:

“Geopolitical risk → Oil spike → Dollar buying”

to

“Policy response → Oil decline → Dollar correction.”

■ Market Developments

Oil Market

NY WTI Crude Futures

  • Surged to $119.48

  • Later plunged sharply to $96.25

Drivers

  • Escalation and prolonged war concerns → Oil spike

  • FT report of G7 emergency oil reserve release talks → Sharp oil decline

The energy market is currently the central driver of global market movements.

Foreign Exchange Market

Following the drop in oil prices, a correction in dollar buying emerged.

Major currency moves

Currency Pair Movement
USD/JPY Fell toward 158.20
EUR/USD Rose to around 1.1573
GBP/USD Rebounded to around 1.3360

U.S. Dollar Index

  • Rose to 99.695 (highest level since November last year)

  • Later retreated to the 99.30 range

Key factors

The selection of Mojtaba Khamenei (son of Supreme Leader Ali Khamenei) as Iran’s new Supreme Leader heightened concerns over a continued hardline policy stance, increasing geopolitical risk.

However, the G7 reserve release discussion triggered a temporary pullback in the dollar.

■ Key Events to Watch Today

Economic Indicators

No major U.S. data releases are scheduled.

Upcoming data:

  • German Manufacturing Orders (January)

  • German Industrial Production (January)

  • Mexico CPI (February)

Policy & Events

  • ECB Executive Board Member Elderson speech

  • Eurogroup Finance Ministers Meeting

  • Federal Reserve blackout period (until the 19th)

Market Environment

The United States and Canada have shifted to daylight saving time, reducing the time difference with Japan by one hour.

■ Current Market Structure

The current market theme is extremely straightforward.

Three factors are driving global markets:

  1. War risk

  2. Oil prices

  3. Policy responses

In particular, the following chain reaction is dominating:

Oil → Inflation → Interest Rates → U.S. Dollar

As a result, movements in the energy market are effectively determining the direction of the FX market.

■ Trading Perspective

The market environment has become a news-driven market.

Key characteristics:

  • Sharp moves triggered by geopolitical headlines

  • Oil-led market direction

  • Elevated short-term volatility

Therefore, position management is more important than usual.

■ Summary

Global financial markets have effectively shifted into a “war market.”

The core structure is:

  • War escalation → Rising oil prices → Dollar buying

  • Policy response → Falling oil prices → Dollar correction

This headline-driven market environment is likely to persist for the time being.

For traders, it is essential to prioritize monitoring the oil market and geopolitical developments.

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