JPMorgan Chase foreign exchange strategists have turned positive on the U.S. dollar for the first time in a year, as conflict in the Middle East drives up energy costs and threatens the outlook for global economic growth.

"Time has now become the enemy of the macroeconomic outlook: the longer energy prices remain high, the deeper and more protracted the drag on markets will be," wrote a team led by JPMorgan strategists Meera Chandan and Arindam Sandilya in a report on Friday. "With both bonds and equities under pressure, the dollar stands out as the best defensive play across asset classes."

Within just two weeks, a historic surge in oil prices, driven by U.S. and Israeli airstrikes on Iran, has upended investor expectations for inflation and economic activity this year. While the dollar has strengthened against all 16 major currencies tracked by Bloomberg, U.S. Treasuries and stocks have declined simultaneously.

Analysts noted that the near-closure of the Strait of Hormuz, a critical chokepoint for oil shipments, is a key factor behind JPMorgan's shift in stance on the dollar. Currencies of economies closely linked to global oil prices—such as the U.S. dollar, Canadian dollar, and Australian dollar—have outperformed others since the outbreak of the conflict. The euro and Asian currencies face the greatest risks.

JPMorgan indicated that its bullish view on the dollar reflects a "prudent insurance" strategy rather than strong conviction in the dollar's fundamentals. The bank advised traders to hold dollars instead of a basket of energy-dependent currencies, including the euro, British pound, and Swedish krona.