Tensions between the US and Iran have triggered a surge in oil prices, subsequently strengthening the US dollar. However, this appreciation is not driven by a return to safe-haven demand but rather by a "passive benefit" stemming from a reshaping of the global energy landscape. As soaring oil prices batter the currencies of energy-importing nations, the United States, being a net exporter, becomes the destination of choice for capital by default.
This logic is clearly reflected in market performance, showing a divergence between the dollar and the yen, two traditional safe-haven assets. The US is strengthening against the trend due to its status as a net energy exporter, while Japan, which relies on the Strait of Hormuz for approximately one-third of its energy imports, faces direct pressure on its trade balance. On Monday, the yen fell over 1% against the dollar, hitting a new low for the month. The safe-haven narrative is yielding to energy dynamics—the dollar's strength is essentially a passive outcome of this imbalanced landscape.
Nevertheless, the yen's short-term weakness does not signify a fundamental erosion of its safe-haven status. In a recent report, Goldman Sachs recommended increasing holdings in gold, the US dollar, and the yen as a core portfolio for navigating geopolitical risks. Their allocation strategy is based on two key points: firstly, the dollar and yen, as traditional safe-haven currencies, have historically posted positive returns 67% of the time during geopolitical conflicts and are expected to continue strengthening in an environment of rising oil prices and pressured risk assets; secondly, gold offers both an ultimate safe-haven attribute and resilience, with a 12-month expected return of 5.9% and a negative correlation with US real yields, highlighting its allocation value during periods of uncertainty.
In practical terms, Goldman Sachs emphasizes the need for a coordinated allocation of these three assets to achieve risk diversification: in the forex market, opportunities in the dollar, yen, and currencies of oil-exporting nations can be explored; gold should be included as a core asset in the portfolio, complementing low-volatility stocks and infrastructure assets. Simultaneously, investors must be wary of the opportunity cost of over-concentration in any single safe-haven asset. If geopolitical tensions ease or oil prices retreat, portfolios should be rebalanced promptly to maintain flexibility while withstanding shocks.
The dollar's strength is rooted in energy dynamics, not safe-haven flows. Since the previous administration's return to the White House last year, the dollar's traditional role as a safe haven during market turmoil has noticeably weakened. Economic policy uncertainty and geopolitical instability have made overseas investors increasingly cautious toward dollar-denominated assets.
Over the weekend, a large-scale aerial bombardment by allied forces on Iranian targets sparked regional conflict. Following the news, the dollar index surged sharply, superficially resembling a resurgence of safe-haven demand. However, as noted by a Reuters columnist, the core logic behind this dollar rally is not a flight to safety into the dollar, but rather stems from structural differences in energy exposure across major economies—buying the dollar is more about selling the currencies of energy-importing economies.
Market performance confirms this assessment. On Monday, international oil prices surged up to 10%, directly pressuring currencies of energy-import-dependent nations: with approximately one-third of Japan's energy imports passing through the Strait of Hormuz, the yen fell over 1%; the euro also declined by 1%, touching its lowest level in over a month.
Persistently high oil prices could create a self-reinforcing cycle for the dollar. From a macro perspective, the actual impact of this oil price shock remains relatively moderate. Economists at Barclays estimate that a sustained $10 per barrel increase in international oil prices could drag on global economic growth by up to 0.2 percentage points. With Brent crude netting a $5 increase to $77 per barrel on Monday, the direct impact on the real economy remains manageable, with particularly limited negative effects on US demand.
The inflation dimension provides additional support for the dollar. With the US core inflation rate still above 3%, rising oil prices further reinforce the rationale for the Federal Reserve to maintain high interest rates this year, thereby solidifying the dollar's interest rate advantage.
However, this transmission mechanism carries potential risks. A Barclays rule of thumb indicates that a $10 per barrel rise in oil prices corresponds to a 0.5% to 1.0% appreciation of the dollar. This implies that if energy prices, denominated in dollars, continue to rise and push the dollar exchange rate higher, it would simultaneously amplify the energy shock for overseas economies and further depress their currencies, creating a self-reinforcing cycle of "rising oil prices → stronger dollar → worsening overseas economies → even stronger dollar."
As the Reuters columnist stated, this scenario is not in the interest of any party, including Washington itself. A core economic agenda of the previous administration was precisely to correct the dollar's years of overvaluation.
Goldman Sachs' defensive portfolio: Short-term bullish on the dollar, overweight gold, and expecting a yen recovery. Goldman Sachs, in its latest report, recommends increasing exposure to the US dollar, Japanese yen, and gold as a core portfolio for geopolitical risks. The logic is as follows: the dollar is strengthening short-term due to its net energy exporter status; the yen, while pressured by import dependency, has room for recovery once conflicts subside; and gold has demonstrated the most stability during past geopolitical shocks, highlighting its defensive value.
The Goldman Sachs team judges that the dollar will maintain short-term strength against a backdrop of rising geopolitical risks and considers it an important factor in cross-asset allocation. However, projections suggest this strength may be difficult to sustain until year-end: the 3-month target for EUR/USD is 1.18, essentially flat with current levels, while the 12-month target is revised up to 1.25.
In contrast, the yen's situation under the energy shock is more complex. Goldman's 3-month forecast for USD/JPY is 160, implying further yen weakness from the current level of 156.1, reflecting the short-term pressure from its energy import dependency—with about one-third of Japan's energy imports needing to pass through the Strait of Hormuz, the oil price surge directly impacts its trade balance.
In the six geopolitical events analyzed in the report, the yen's average return was -1%, with a success rate of only 33%, underperforming other safe-haven assets. However, as the conflict's impact fades, the yen could gradually recover, with a 12-month target falling back to 155. This is the core logic behind including it in the overweight portfolio: short-term pressure does not alter its long-term allocation value, but investors must carefully distinguish its differentiated performance from other safe currencies during energy shocks.
Among the three safe-haven assets, gold's defensive value is considered the most certain. Goldman Sachs explicitly lists it as a core defensive tool under geopolitical risk, giving it an overweight rating. The report indicates that spot gold is currently around $5,254 per ounce, with a 12-month target price of $5,565, implying approximately 5.9% upside potential.
This judgment is based on gold's stable performance during past geopolitical shocks: in the six major events analyzed, gold's average return was a positive 3%, with a success rate as high as 67%, making it the most stable performer among all safe-haven assets. At a time when equity drawdown risks are rising, increasing gold holdings can help effectively smooth portfolio volatility.