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During the second week of March, the foreign exchange market faced a complex environment shaped more by geopolitical tensions than typical financial indicators. With the escalation of conflict in the Middle East, the U.S. Dollar (USD) regained its position as the leading safe-haven currency. This shift contributed to a broader move away from riskier assets, influencing major currency pairs and even emerging market crosses as traders responded to inflation concerns and potential global supply chain disruptions. The Dollar Index (DXY) and Safe-Haven Supremacy The Dollar Index (DXY) rose to 100.04 by Friday, marking its highest point since late November 2025 and signaling a second consecutive weekly gain. The ongoing tensions involving Iran intensified demand for the greenback. Investors currently view the U.S. as comparatively better positioned than other large economies, largely due to its higher degree of energy independence. This factor has gained increased relevance as oil prices surpassed $100 per barrel. The US CPI statistic for February, on the other hand, was 2.4%. That number, which showed a slow decrease in inflation, was enough to convince the markets that the Federal Reserve will stay cautious and dovish, perhaps putting off any big rate decreases until at least June 2026. Majors: Yen, Euro and Sterling Under Siege The major currency pairs felt the brunt of the dollar's resurgence. The EUR/USD pair dropped below a key support level of 1.1600, moving toward 1.1537, pressured by Europe’s heavy reliance on imported energy amid rising oil prices that neared $120 per barrel. Similarly, GBP/USD opened Monday at 1.3248, its weakest level since December, influenced by surging oil prices and firm demand for the dollar. The pair remains in a downtrend with intermittent upside volatility, as markets factor in the Middle East conflict and rising inflation risks from higher crude oil prices. The sterling has been more stable than the euro because the Bank of England has been more cautious about relaxing. However, that hasn't been enough to make up for the dollar's safe-haven premium this week. USD/JPY, the pair settled around 158.39 mid-week, gaining approximately 1.12% on the week, with traders watching key resistance at 159.00. Even though the yen is a safe haven currency, it has experienced weakness in recent daysk. This is because Japan's energy imports are making the trade deficit bigger, which makes it harder for the Bank of Japan to raise interest rates. Exotics: ZAR Caught Between Oil and Optimism In emerging markets, the South African Rand illustrated the pressures faced amid these developments. The USD/ZAR pair surged toward 16.8 early in the week, before pulling back near 16.4. The challenges for the Rand are structural, as South Africa imports all of its crude oil, making any oil price surge simultaneously an inflation, current account, and fiscal concerns. Reuters spoke to the Governor of the South African Reserve Bank, who said that the bank is rewriting its risk scenarios before its next meeting on March 26. Meanwhile, the rand's usual boost from gold prices has only partially helped. That’s because demand for safe-haven gold has stabilized but not risen enough to make up for the selling pressure caused by oil prices. Outlook for the Coming Week Looking ahead, the key question is whether the dollar’s recent strength will persist or if possible easing in the Iran conflict might revive risk appetite. The Federal Reserve’s upcoming policy meeting will be a crucial event, with the updated dot plot and Chair Powell’s press conference expected to provide clear guidance on the dollar’s trajectory through April. Should the Fed adopt a hawkish stance recognizing oil’s inflationary impact, the dollar could maintain its upward momentum. Conversely, a more dovish interpretation of economic conditions may prompt a reversal of recent gains. What key factors moved currencies this week? Geopolitical escalation in the Middle East surged oil prices, boosting USD as a safe haven; US CPI and jobless claims also influenced movements. Why did the U.S. dollar strengthen against other major currencies this week? The dollar’s gains were driven largely by a widespread flight to safety amid regional instability, overriding longer-term structural concerns about the currency. What is the main event to watch next week? Central banks are having a "Super Week" next week. The Federal Reserve, the Bank of England, and the European Central Bank all meet from March 16 to 19. How they react to the current rise in inflation caused by oil prices will set the next big trend for the Dollar.