The U.S. dollar jumped sharply on Thursday, April 2, 2026, after President Donald Trump’s televised address on the Iran war shattered market expectations for a near-term de-escalation of the conflict. In his speech, Trump pledged more aggressive military strikes over the next two to three weeks but offered no concrete timeline for reopening the Strait of Hormuz or ending a war now in its fifth week. The dollar index climbed 0.68% to 100.24, its best single-day performance since March 18, as investors dumped riskier assets and piled into safe-haven positions. The euro, sterling, yen, and Australian dollar all fell sharply, while Brent crude futures surged nearly 8% to above $109 per barrel. U.S. Treasury yields initially spiked on inflation fears before moderating, and Wall Street’s fear gauge — the CBOE Volatility Index — jumped to 25. The market selloff sets up a tense Friday ahead of the U.S. non-farm payrolls report, with economists warning that any sign of labour market weakness could amplify growing concerns about stagflation.
Key Overview
- Dollar Index: Rose 0.68% to 100.24, best day since March 18
- Euro: Fell 0.66% to $1.1513
- Sterling: Dropped 0.88% to $1.319
- Japanese Yen: Weakened 0.6% to 159.72 per dollar, nearing the critical 160 intervention level
- Australian Dollar: Declined 0.95% to $0.6863
- Brent Crude: Surged nearly 8% to $109.10 per barrel
- U.S. Crude (WTI): Jumped over 10% to above $110 per barrel
- 10-Year Treasury Yield: Rose 5 basis points to 4.376% in Asian trading before moderating
- VIX (Fear Gauge): Rose 2.6% to 25, briefly touching 27
- Conflict Timeline: War now in its fifth week; Trump pledged 2-3 more weeks of strikes
- Key Upcoming Data: U.S. non-farm payrolls (Friday), consensus estimate of 60,000 job gains
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Trump’s Speech Shatters Ceasefire Hopes
Markets had entered Wednesday evening with cautious optimism. A two-day rally in equities and corresponding dollar weakness earlier in the week had reflected growing expectations that President Trump might use his nationally televised address to signal a path toward de-escalation — perhaps even a concrete timeline for reopening the strategically vital Strait of Hormuz, the maritime chokepoint through which roughly 20% of global oil supplies normally transit.
Instead, Trump pledged to hit Iran “extremely hard” over the next two to three weeks, threatening to bomb the country’s power infrastructure and send it “back to the stone ages.” He said U.S. military objectives in Iran were nearly accomplished but offered no timeline for ending the conflict or restoring shipping through the strait. Trump also told oil-dependent nations to “grab it and cherish it” — referring to the Strait of Hormuz — and suggested they buy American crude instead.
Iran’s military responded swiftly, warning the United States and Israel of “more crushing, broader and more destructive” attacks in retaliation. The combination of Trump’s escalatory rhetoric and Iran’s defiant response effectively closed the window on any near-term ceasefire speculation.
Dollar Rally: Safe Haven Demand Returns With Force
The market reaction was immediate and decisive. Investors abandoned riskier assets and rushed into the U.S. dollar, which has served as the primary safe-haven currency since the conflict began in late February 2026.
The dollar index, which measures the greenback against a basket of six major currencies, climbed 0.68% to 100.24, reclaiming the psychologically significant 100 level and putting it on track for its best session in two weeks. Thursday’s advance effectively wiped out most of the greenback’s losses from the previous two days, when brief optimism about a possible ceasefire had triggered selling in the dollar.
Carol Kong, a currency strategist at Commonwealth Bank of Australia, told Reuters that Trump’s comments had failed to reassure markets and that investors were beginning to accept the war would likely escalate further before any de-escalation could occur. She said the dollar could rise further against all major currencies as markets priced in the likelihood of a material global economic slowdown. Kong added that given her team’s expectation for the conflict to extend into at least June, the greenback’s upward trajectory was far from exhausted.
The euro fell 0.66% to $1.1513, giving up recent gains. Sterling slid 0.88% to $1.319, weighed down both by the safe-haven flow into the dollar and by the exposure of the UK economy to energy-driven inflation. The risk-sensitive Australian dollar, widely viewed as a barometer of global growth expectations, dropped 0.95% to $0.6863.
The Japanese yen traded 0.6% weaker at 159.72 per dollar, inching toward the psychologically critical 160 threshold. That level has historically been viewed as a line in the sand for potential intervention by Japanese authorities to defend the currency.
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Oil Prices Surge as Supply Fears Deepen
The energy market’s response was equally dramatic. Brent crude futures surged nearly 8% to $109.10 per barrel in the hours following Trump’s address, while U.S. crude (WTI) jumped more than 10% to above $110. Buyers of physical barrels in Houston were reportedly willing to pay close to $120 per barrel — a premium of approximately $5.50 over the May futures contract.
The price spike reflected fresh fears about a sustained disruption to the Strait of Hormuz, which Iran has effectively shut down since early March. The head of the International Energy Agency, Fatih Birol, warned just a day earlier that April would be “much worse than March” for oil supply, as the last cargoes that were already on the water before the war began have now largely reached their destinations. Oil prices have risen more than 60% since the conflict began.
John Kilduff, founding partner at Again Capital, told CNBC that “the speech was a disaster” for energy markets, adding that the market was rapidly pricing in the impact of a prolonged war and continued strait closure. Analysts at TD Securities warned that global crude oil and product stockpiles were being depleted at an unsustainable pace and that physical tightness already evident in Asia would soon cascade globally.
Retail gasoline prices in the United States could surge to between $4.25 and $4.45 per gallon in the next two weeks at the current pace, according to Patrick De Haan of GasBuddy. Diesel prices could reach $5.80 to $6.05, a development that analysts warned would feed directly into broader consumer inflation during the second quarter.
Stocks Slide, Yields Spike on Stagflation Fears
The risk-off trade extended across equity markets. Wall Street futures fell sharply overnight following Trump’s address, and European and Asian markets followed suit during Thursday’s trading sessions. Oil stocks were a notable exception, with ExxonMobil, Chevron, Devon Energy, and ConocoPhillips all rising between 2% and 3%, while airlines including Delta, United, and Alaska Air fell 3% or more.
Wall Street’s CBOE Volatility Index (VIX) rose 2.6% to 25, briefly touching 27, reflecting elevated uncertainty about the near-term market outlook. The VIX has remained stubbornly elevated since the war began, with futures contracts pricing in no meaningful decline in market fear for the rest of 2026.
U.S. Treasury yields initially jumped 5 basis points to 4.376% on the 10-year note in Asian trading, driven by fears that higher oil prices would entrench inflation and eliminate any remaining prospects for Federal Reserve rate cuts in 2026. The yields later moderated as the session progressed, settling around 4.30% after reports emerged of Iran and Oman drafting a protocol to “monitor” Strait of Hormuz traffic.
The yield on the 10-year Treasury has risen from approximately 3.97% before the war to over 4.3%, a move that has already sent mortgage rates and business borrowing costs meaningfully higher across the U.S. economy. The rise in long-term yields reflects what analysts describe as a growing stagflation scenario — lower economic growth paired with persistently higher inflation driven by the energy shock.
Expectations for Federal Reserve rate cuts have been largely priced out of markets. Bets on a December 2026 reduction have fallen to just 12%, down from approximately 25% before Trump’s latest remarks.
The Wider Conflict: Five Weeks of Market Turmoil
The market disruption triggered by Trump’s speech is the latest episode in what has been five weeks of sustained financial turmoil since the U.S.-Israeli military operation against Iran commenced on February 28, 2026.
The Strait of Hormuz — the narrow waterway connecting the Persian Gulf to the global market — has been effectively closed since early March, with Iran attacking civilian shipping and energy infrastructure in the Gulf. The disruption has removed an estimated 12 million barrels per day of oil from global supply, more than double the supply losses of both the 1973 and 1979 oil crises combined, according to the IEA.
The consequences have been felt globally. Fuel shortages have emerged across Asia, from Thailand to Pakistan and Australia. The Dow Jones Industrial Average has entered correction territory after shedding 10% from its February highs. The European Central Bank has postponed planned interest rate reductions, raising its 2026 inflation forecast. Goldman Sachs has forecast Brent crude averaging $110 through April, while Macquarie strategists have warned prices could reach $200 per barrel if the conflict persists through June.
The Week Ahead: Non-Farm Payrolls in the Crosshairs
With markets closing early for the Easter long weekend — U.S. markets are shut on Good Friday — attention will now pivot to Friday’s non-farm payrolls report for March. Economists polled by Reuters expect a gain of 60,000 jobs, with unemployment forecast to hold steady at 4.4%. The March report is the first to reflect data collected during the war.
The stakes are high. A weaker-than-expected jobs print would intensify the stagflation narrative that has taken hold across markets, placing the Federal Reserve in an impossible bind between combating rising inflation and supporting a weakening labour market. A stronger print, conversely, could give the Fed more room to hold rates steady without cutting — but would do little to ease concerns about the energy-driven inflation pipeline.
Kyle Rodda, senior financial market analyst at Capital.com, warned that “another miss could rattle the markets and crank the volume up on the chorus warning about stagflation,” given the challenges the Fed faces in lowering rates amid the energy shock. He added that markets could be “extra choppy going into the Easter long weekend.”
For currency traders, the direction is clearer. As long as the war continues, the Strait remains closed, and oil prices keep climbing, the dollar’s safe-haven appeal is likely to strengthen. With Carol Kong at Commonwealth Bank of Australia expecting the conflict to extend into at least June, the greenback’s rally may have considerably further to run — and the pain for non-dollar currencies is likely only beginning.
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