"War and oil prices boost the US dollar, bullish bets hit strongest since 2024."

Notice that, as the Middle East conflict enters its fourth week and the US and Iran exchange threats, the US dollar exchange rate is on the rise, with traders betting that this reserve currency will further appreciate. During the early trading session in London, the Bloomberg US Dollar Spot Index rose by 0.3%. Since the outbreak of the war, the index has jumped by a cumulative 2.2%, supported by soaring energy prices which are benefiting the US economy as a major oil exporting country, and investors are flocking towards safe-haven assets. Currently, the US dollar exchange rate is just a step away from hitting a new annual high; options traders expect the dollar to continue rising, with bullish sentiment reaching its highest level since 2024. Following US President Trump's ultimatum to Iran - demanding the reopening of the Strait of Hormuz or face attacks on their power plants, the US dollar has risen against all G10 currencies. In response, the Iranian government threatened to "completely" close the Strait of Hormuz, causing oil prices to rise further and once again supporting the US dollar. Senior analyst at Danske Bank, Jens Naervig Pedersen, stated: "Based on the current situation, the US economy is showing signs of resilience against energy shocks, and we expect this to support the US dollar in the coming weeks." The US dollar's rise is driven by strong demand for options Currency traders familiar with the market revealed that hedge funds who bought US dollars last Friday are now increasing their positions. Although spot and options trading volumes are lower than recent averages, it is clear that leveraged investors are positioning themselves for further US dollar appreciation. Risk reversal indicators (measuring the cost difference between buying and selling a currency in the options market) also point in the same direction, with premiums for US dollar call options expanding on Monday. Additionally, demand for protective measures against sharp fluctuations in the US dollar exchange rate has significantly increased. Even though trading volumes are down, demand for tail risk protection remains high Analysis of options flows reported by the Depository Trust & Clearing Corporation (DTCC) confirms this trend. Last week, positions betting on a stronger US dollar against the Euro and the Pound remained consistent, with nearly 60% of trades favoring a stronger US dollar. This trend was evident in every trading day last week and continued into this Monday.