As the Iran conflict cools, markets and economies are expected to gradually revert to pre-conflict trends, with local developments regaining importance relative to geopolitics. However, some scarring is likely to persist, including a more hawkish central bank bias and renewed questions about the role of traditional safe havens. The conflict triggered safe-haven flows into the USD, which has also recently been supported by the resilience of the US economy, a more hawkish Fed, and the strength of the energy and technology sectors. While global diversification trends may continue, the USD has demonstrated its ability to benefit in both risk-on and risk-off environments, leaving us less bearish on the currency than we were before the conflict.
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