The US dollar rose at the start of the week, pushing the Dollar Index (DXY) back towards its 200-day moving average near 98.500. This followed Friday’s low of 97.632, alongside a rise in Brent and pressure on high beta commodity currencies.
Renewed uncertainty over the US–Iran situation contributed to the move, after earlier expectations of de-escalation and the re-opening of the Strait of Hormuz weakened. Reports said the US navy fired upon and boarded an Iranian-flagged cargo ship in the Gulf of Oman, described as the first seizure since a US blockade of the Strait was introduced.
Other reports said Iran’s Islamic Revolutionary Guard Corps (IRGC) fired on multiple commercial vessels in the Strait. Iran was also reported to have reimposed “strict control” after briefly saying on Friday that it had re-opened the Strait.
These developments raised uncertainty over whether further talks would occur before a two-week ceasefire ends tomorrow. The article states it was created with the help of an AI tool and reviewed by an editor.
We remember last year in 2025 when a flare-up between the US and Iran sent the dollar higher, pushing the Dollar Index back towards its long-term average. This uncertainty in the Middle East dampened optimism and reminded us how quickly capital can flow to safety. The events surrounding the Strait of Hormuz served as a clear signal for how geopolitical risk drives the currency market.
Looking at today, April 20th, 2026, the DXY is hovering around 105.20, showing strength even without a major conflict. The CBOE Volatility Index, or VIX, has settled near 16, which is lower than the peaks seen during past tensions but still shows traders are on guard. We view this relative calm as an opportunity to prepare for potential surprises rather than a sign of lasting stability.
Given how quickly Brent crude prices reacted to naval actions in the Gulf of Oman last year, we should consider buying call options on oil futures. Current Brent prices are stable around $91 per barrel, making short-term call options a relatively inexpensive way to position for a sudden spike in risk. This offers a direct hedge against any disruption to the flow of oil through the Strait.
We should also look at currency pairs involving high-beta commodity currencies, which suffered during the 2025 scare. Considering put options on the Australian dollar (AUD) or New Zealand dollar (NZD) against the US dollar could be a prudent move. This strategy provides a hedge that would perform well if we see a similar flight to the safety of the dollar in the coming weeks.
