The war reignites! Oil market alarms, yet the US dollar reaches its highest valuation.
2026-03-11 17:17:29
On Wednesday (March 11) during the Asian and European sessions, global risk aversion reignited, and the US dollar index rebounded from its lows, currently trading at 98.97, up slightly by 0.03%. It had earlier fallen to 98.69, down 0.25%. The global oil supply crisis, initially boosted by Trump's remarks, did not last long. The ongoing conflict in Iran and the impasse over the Strait of Hormuz reignited global tensions, causing the US 10-year Treasury yield to plummet, and the dollar to follow suit.
The US economy has been battling inflation in recent years, experiencing historic inflation during the pandemic.
Today, the sudden geopolitical war in the Middle East is posing a new challenge to the United States through energy market turmoil.
The conflict between the US and Iran has caused a severe disruption to oil supplies, and the Strait of Hormuz, a vital global energy transport artery, has blocked traffic, causing international oil prices to surge. US WTI crude oil once rose to $119 per barrel before falling back to $92 per barrel.
The end-market came under rapid pressure, with gasoline prices rising by a cumulative 50 cents, from $2.98 per gallon to $3.48 per gallon, while the costs of other energy sources such as diesel and jet fuel also increased.
Economists warn that the longer the crisis lasts, the greater the systemic risk to the US economy. University of Michigan professor Justin Wolfers bluntly stated, "The US economy is already on the verge of recession, and the oil price shock could very well be the trigger."
Rising energy prices are primarily impacting consumer spending: Moody's Analytics estimates that for every $10 increase in oil prices per barrel, the average American household's annual expenditure will increase by nearly $450.
As a consumption-driven economy, pressure on household budgets could trigger a chain reaction—a recessionary cycle of reduced consumption → corporate layoffs → further consumption contraction.
Even more serious is the increasing fragility of the job market: the U.S. is projected to add only 116,000 jobs in 2025, the lowest non-recession period since 2002, and there have been net job losses in five of the past nine months.
JPMorgan strategist David Kelly admitted that the job losses and soaring oil prices have created a "double whammy," and people's large tax refunds may be mostly used for refueling.
The conflict has triggered a chain reaction in financial markets and business confidence: the stock market has already seen a correction, with market concerns that a continued conflict could trigger a bear market with a 20% drop in US stocks. Ed Yardeni, president of Yardeni Research, pointed out that if oil prices remain at $100 per barrel and suppress the stock market, it could affect consumption by high-income groups, which is the core reason why he raised the probability of a "market crash + recession" from 5% to 20%.
Business confidence has also been dampened, with weak non-farm payroll data coupled with rising oil prices making already hesitant employers even less willing to expand hiring. Kelly warned: "The current economic vulnerability has increased significantly, and another shock could plunge it into recession."
However, the current situation differs significantly from historical oil crises: the US led the way in ending the conflict, and Trump's statement that the conflict was "basically over" eased market panic.
The G7 and the IEA are working together to release more than 1.2 billion barrels of strategic petroleum reserves to stabilize supply. More importantly, the United States is already a net energy exporter, and its dependence on overseas oil has decreased significantly. Its $30 trillion economy has a strong capacity to absorb the excess oil.
RSM chief economist Joe Brucewell pointed out that although the risk of recession has increased, it has not yet reached the key thresholds of "oil price of $125 per barrel, gasoline of $4.25 per gallon, and inflation of 4%", and the economy still has room for maneuver.
DBS Group strategist Philip Vyne pointed out that the US dollar index's failure to break through the key level of 99.7 indicates that a turning point in global risk sentiment is coming in 2026.
The core reason lies in the Federal Reserve's policy shift: the current real interest rate of 0.75% and the unemployment rate of 4.4% have shifted the focus to a soft landing for the economy rather than aggressive anti-inflation measures, fundamentally limiting the upside potential of the dollar.
In addition, G7 and IEA measures have suppressed safe-haven demand, the "energy doomsday" trade has subsided, and the US dollar has lost the support for aggressive interest rate hikes in 2022.
Unless the conflict escalates again and triggers long-term inflation, forcing the market to withdraw its expectations of two Fed rate cuts in 2026, the dollar is unlikely to regain its previous strength.
As the fog of war dissipates, market demand for the US dollar as a safe haven is decreasing. Tonight, the US will release its CPI data, and the market will continue to trade around global inflation and the rise in the global interest rate center.
However, even if the CPI rises or global inflationary pressures increase, the support for the dollar by raising expectations of Fed rate hikes may be one-off and temporary, because Trump ultimately hopes to achieve the return of domestic manufacturing to the US and a healthy stock market through interest rate cuts and a weaker dollar.
At the same time, even if the United States revitalizes traditional energy, it will be difficult to reduce national energy prices through fossil fuels. High energy costs will also inhibit its domestic economic development, ultimately pointing to a weakening dollar. This creates a fatal expectation gap: the dollar, which was driven up by war, may be at its most overvalued.
From a technical perspective, the US dollar index is consolidating at the top of its trading range, with resistance around 96.69, where it remains suppressed by the neckline of the previous double top pattern.
(US Dollar Index Daily Chart, Source: FX678)
At 17:14 Beijing time, the US dollar index is currently at 98.97.
The US economy has been battling inflation in recent years, experiencing historic inflation during the pandemic.
Today, the sudden geopolitical war in the Middle East is posing a new challenge to the United States through energy market turmoil.
Energy supply disruptions: Soaring oil prices sound recession warnings
The conflict between the US and Iran has caused a severe disruption to oil supplies, and the Strait of Hormuz, a vital global energy transport artery, has blocked traffic, causing international oil prices to surge. US WTI crude oil once rose to $119 per barrel before falling back to $92 per barrel.
The end-market came under rapid pressure, with gasoline prices rising by a cumulative 50 cents, from $2.98 per gallon to $3.48 per gallon, while the costs of other energy sources such as diesel and jet fuel also increased.
Economists warn that the longer the crisis lasts, the greater the systemic risk to the US economy. University of Michigan professor Justin Wolfers bluntly stated, "The US economy is already on the verge of recession, and the oil price shock could very well be the trigger."
Consumption and employment are under pressure: a negative cycle of recession is emerging.
Rising energy prices are primarily impacting consumer spending: Moody's Analytics estimates that for every $10 increase in oil prices per barrel, the average American household's annual expenditure will increase by nearly $450.
As a consumption-driven economy, pressure on household budgets could trigger a chain reaction—a recessionary cycle of reduced consumption → corporate layoffs → further consumption contraction.
Even more serious is the increasing fragility of the job market: the U.S. is projected to add only 116,000 jobs in 2025, the lowest non-recession period since 2002, and there have been net job losses in five of the past nine months.
JPMorgan strategist David Kelly admitted that the job losses and soaring oil prices have created a "double whammy," and people's large tax refunds may be mostly used for refueling.
Financial and Confidence Resonance: Multiple Risks Increase Recession Probability
The conflict has triggered a chain reaction in financial markets and business confidence: the stock market has already seen a correction, with market concerns that a continued conflict could trigger a bear market with a 20% drop in US stocks. Ed Yardeni, president of Yardeni Research, pointed out that if oil prices remain at $100 per barrel and suppress the stock market, it could affect consumption by high-income groups, which is the core reason why he raised the probability of a "market crash + recession" from 5% to 20%.
Business confidence has also been dampened, with weak non-farm payroll data coupled with rising oil prices making already hesitant employers even less willing to expand hiring. Kelly warned: "The current economic vulnerability has increased significantly, and another shock could plunge it into recession."
US Response and Institutional Analysis:
However, the current situation differs significantly from historical oil crises: the US led the way in ending the conflict, and Trump's statement that the conflict was "basically over" eased market panic.
The G7 and the IEA are working together to release more than 1.2 billion barrels of strategic petroleum reserves to stabilize supply. More importantly, the United States is already a net energy exporter, and its dependence on overseas oil has decreased significantly. Its $30 trillion economy has a strong capacity to absorb the excess oil.
RSM chief economist Joe Brucewell pointed out that although the risk of recession has increased, it has not yet reached the key thresholds of "oil price of $125 per barrel, gasoline of $4.25 per gallon, and inflation of 4%", and the economy still has room for maneuver.
DBS Group strategist Philip Vyne pointed out that the US dollar index's failure to break through the key level of 99.7 indicates that a turning point in global risk sentiment is coming in 2026.
The core reason lies in the Federal Reserve's policy shift: the current real interest rate of 0.75% and the unemployment rate of 4.4% have shifted the focus to a soft landing for the economy rather than aggressive anti-inflation measures, fundamentally limiting the upside potential of the dollar.
In addition, G7 and IEA measures have suppressed safe-haven demand, the "energy doomsday" trade has subsided, and the US dollar has lost the support for aggressive interest rate hikes in 2022.
Unless the conflict escalates again and triggers long-term inflation, forcing the market to withdraw its expectations of two Fed rate cuts in 2026, the dollar is unlikely to regain its previous strength.
Summary and Technical Analysis:
As the fog of war dissipates, market demand for the US dollar as a safe haven is decreasing. Tonight, the US will release its CPI data, and the market will continue to trade around global inflation and the rise in the global interest rate center.
However, even if the CPI rises or global inflationary pressures increase, the support for the dollar by raising expectations of Fed rate hikes may be one-off and temporary, because Trump ultimately hopes to achieve the return of domestic manufacturing to the US and a healthy stock market through interest rate cuts and a weaker dollar.
At the same time, even if the United States revitalizes traditional energy, it will be difficult to reduce national energy prices through fossil fuels. High energy costs will also inhibit its domestic economic development, ultimately pointing to a weakening dollar. This creates a fatal expectation gap: the dollar, which was driven up by war, may be at its most overvalued.
From a technical perspective, the US dollar index is consolidating at the top of its trading range, with resistance around 96.69, where it remains suppressed by the neckline of the previous double top pattern.
(US Dollar Index Daily Chart, Source: FX678)
At 17:14 Beijing time, the US dollar index is currently at 98.97.
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