The usual inverse correlation between the US dollar and global oil prices has reached a historic high. An 11‑week conflict in the Middle East and the blockade of key shipping routes have disrupted the traditional negative relationship between these assets.
Bloomberg analysts found out that the Bloomberg Dollar Spot Index and Brent futures nowadays move in sync to the nth degree since the indicator was launched in 2005. Historically, a strong dollar weighs on oil prices because a stronger currency reduces demand for commodities. However, military actions in Iran have triggered a near‑vertical rise in both instruments simultaneously.
Brent has jumped 45% since late February — the time of the first US and Israeli strikes on Iran, which effectively shut down transit through the Strait of Hormuz. The International Energy Agency (IEA) has already warned of a persistent “acute supply deficit” through at least October.
The abnormal positive correlation was recorded in early March. As a result, traditional market drivers — interest rate differentials and GDP data — have lost relevance for currency traders.
Macroeconomics has given way to geopolitics, high-impact news, and risk appetite. The entire market rhetoric now boils down to the oil chart, Brent Donnelly, president of Spectra Markets, says.
Chris Turner, head of FX strategy at ING Bank, warns that until the stock market undergoes a major correction, global currency dynamics will remain tightly linked to oil shocks and central banks’ emergency responses to imported inflation.
