Recent US-Iran tensions have exposed a significant erosion of the US dollar’s status as a global safe haven asset, according to Nigel Green, CEO of financial advisory firm deVere Group.
Market reactions to escalating geopolitical conflict indicate shifting investor confidence.
Following targeted US strikes on Iranian nuclear facilities, the dollar registered only modest gains despite heightened risks of broader regional conflict. This muted response suggests the currency no longer commands its historical automatic refuge status.
“We’re witnessing a moment of reckoning for the dollar’s reputation as the ultimate safe haven,” stated Nigel Green. He observed, “The market’s restrained response underscores how investor faith is shifting amid this standoff.” The sentiment aligns with the dollar’s 8.6% depreciation against major currencies this year. Green attributes this partly to long-term concerns over former President Donald Trump’s trade tariffs, which he stated undermined US growth expectations and policy stability, alongside persistent US national debt worries.
The current Middle East crisis has not triggered the typical rush into dollar assets seen during past conflicts. Limited initial upticks and hesitant investor commitment suggest tactical positioning rather than structural confidence. “There’s growing consensus that US fiscal trajectory, political dysfunction, and dollar weaponization via sanctions carry risks,” Green noted. Markets now await Iran’s response. Green cautioned that potential retaliation disrupting global oil supplies might not yield “dollar inflows expected historically,” adding, “Capital may move rapidly elsewhere—to commodities, eurozone assets, or insulated emerging markets.”
This rebalancing accelerated after 2008 quantitative easing eroded the dollar’s long-term value, compounded by unpredictable US policies damaging international confidence. “The world hedges against the dollar,” Green stated, citing central bank reserve diversification and institutional exploration of alternatives including digital currencies. While the dollar won’t lose safe haven status overnight, Green concluded “its gravitational pull weakens,” signaling a fundamental shift in global capital’s perception of risk.
The dollar’s declining appeal coincides with sustained efforts by major economies to reduce US financial system reliance, driven by longstanding stability and geopolitical usage concerns.
