The War-Petrodollar trade extends – Oil jumps, Dollar to 2026 highs

• The US Dollar is catching up to its safe-haven status as the Middle East conflict heats up
• Fears of a prolonged intervention and high impact on Oil prices are boosting the Petrodollar status
• Dollar Index Technical Analysis ahead of Non-Farm Payrolls

Today’s Market action is sending out a warning to global Markets – Despite a relatively smooth opening on Monday, things will not be so simple for what could be the most significant conflict in a few decades.

The reassurance of a “4-week” only intervention could prove to be a long shot, as Basij and IRGC forces begin to turn their operations away from their traditional military bases towards civilian infrastructures such as schools, mosques, and more.

Strikes towards the Iranian military command are continuous, and this is proving to be quite a significant turn as Iranian retaliations keep striking Gulf countries with drones and ballistic missiles.

The Market could be pricing in the broader conflict ahead, as Turkish Foreign Minister Hakan Fidan warned, and this is reflected in the broad risk aversion and the rise in global Oil prices – Global Stock Markets are down between 2% and 7%!

Brent is now trading well above its 12-Day War $77 spike – currently around $83.

WTI is on its way towards its June peak ($78.43) and stands close to 2% below that level. The morning spike is now somewhat easing, but tensions are certainly gripping participants and will do so for the time ahead.

Oil is the product to watch to track Market sentiment. Extending above June-War highs implies further detriment in sentiment ahead. If sellers can bring prices back below $73.50, risk sentiment should somewhat recover.

Now turning back to the Petrodollar case – As pointed out in this excellent piece, Fuel prices exploding around the world would make the case for swift dollar demand.

Importers will face a greater need for dollars to sustain demand, which not only hurts major importers’ currencies but could also create a dollar shortage as participants remain heavily short the reserve currency.

For now, Oil is up “only” 15% from its Friday close. Catastrophic scenarios point to $100 a barrel if the conflict stays heated for long. The longer the war, the more damaging it would be to economies and inflation, and the higher the dollar could shoot.

We’ll explore this effect through an in-depth technical analysis of the Dollar Index (DXY).

Discover:

• Wartime is back in Markets – North American Session Market Wrap for March 2
• A look around Markets as Iran operations begin – Market reactions
• Oil prices jump on mid-east attacks, safe-haven demand surges & week ahead

The Dollar has spiked significantly since its 98.00 week-long consolidation, as traders were already pricing in an immediate intervention.

As it materialized, the Greenback broke out even further, extending its gains towards 2026 highs against all major currencies.

It now faces a key test at the 99.50 Resistance zone – Let’s look at its effect on the 1H timeframe after marking a few key levels for action.

Watch out for some short-term mean reversion in the Dollar – Looking at the swift flows, it could be difficult to expect a real reversion lower – The 99.00 Level could be a decent pullback level to get long the dollar.

• CHF/USD, EUR/USD or AUD/USD could be interesting conditionally to them retreating – Watch out to not put all your eggs in the same basket!

Levels to place on your DXY charts:

Resistance Levels

• 99.40 to 99.50 January Resistance (immediate rejection, short-term pullback)
• 99.68 Morning highs – breaching this on high volume should see heavy continuation!
• 100.00 to 100.50 Main resistance and Range highs
• 100.376 November highs
• 101.00 Next key resistance

Support Levels

• 99.00 Key psychological Support
• 98.00 Key Mid-Range Support and 50-MA 98.00
• 2025 Lows Major support 96.50 to 97.00 (mini-range lows, 4H 50-MA)
• Early 2022 Consolidation just below 96.00

The 1H timeframe shows a slightly over-extended move higher, implying a short-term pullback ahead.

The 99.00 Level could prove a sweet spot to catch up on the trend.

• Breaking below the trendline is still possible, but a real reversal lower would only be confirmed below 98.80!
• Breaking back above the 99.68 morning highs would point to a continued breakout.
  • Look at November highs (100.368) in that scenario.

Safe Trades!

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