USD Strengthens on Safe-Haven Flows as Iran Warns of Expanded War

The US dollar is attracting safe-haven demand as Iran's military issued stark warnings that continued US attacks would trigger a response that would "go beyond the enemy's expectations" and expand the conflict to new geographic areas. Iran's army emphasized that a significant portion of its military capabilities remains unused, while simultaneously affirming its commitment to peaceful relations with Gulf neighbors. The escalation in rhetoric is injecting fresh geopolitical risk premium into forex markets, benefiting traditional safe havens like the USD, JPY, and CHF at the expense of risk-sensitive currencies such as AUD, NZD, and CAD. Crude oil prices are also reacting to the heightened tensions, indirectly impacting commodity-linked currency pairs. Traders should watch for potential spikes in volatility across major pairs including EUR/USD, USD/JPY, and USD/CAD. The situation remains fluid, and any further military escalation could trigger sharp risk-off moves across the broader FX market, with particular downside pressure on emerging market and commodity currencies.