By Mari Hansen These days, the Treasury Department has a certain quiet that is only apparent to those who have spent time in government buildings. Officials move through the Treasury annex and the Eccles Building’s hallways with the practiced composure of those who pretend not to hear anything. They’ll tell you on the record that the dollar is okay. Strong, even. On the surface, the numbers support them. However, if you look at the data long enough, a different narrative starts to emerge, one that no one seems eager to present in a press conference.
The dollar index has actually increased since the start of the war with Iran earlier this year, rising by roughly two percent relative to a basket of major currencies. That sounds comforting. A Treasury spokesperson can rely on this type of person. However, a closer examination reveals an oddity. Because they have greater faith in America, investors are not rushing to dollars. Since there isn’t currently a better location, they are parking there. People at the Fed appear to be aware of the difference.
| Field | Detail |
|---|---|
| Topic | U.S. dollar dominance under stress from the U.S.-Israeli war with Iran |
| War’s weekly cost (est.) | $12 billion |
| U.S. national debt context | ~$39 trillion |
| Conflict duration (as of writing) | Roughly ten weeks, ongoing past the 7 April ceasefire collapse |
| Dollar index move during initial war phase | Up ~2% against a basket of major currencies |
| 10-year U.S. Treasury yield shift | Rose ~35 basis points to about 4.3% |
| Fed officials who dissented (late April) | Beth Hammack (Cleveland), Lorie Logan (Dallas), Neel Kashkari (Minneapolis) |
| NY Fed Global Supply Chain Pressure Index (April) | 1.82, highest since 2022 |
| Notable counter-trend | Chinese 10-year yield unchanged at 1.8%; renminbi strengthening |
| Long-term inflation breakeven (10-year) | 2.5%, highest since early 2023 |
| Key chokepoint in headlines | Strait of Hormuz, where Iran seized two vessels in April |
At the late-April meeting, three Fed presidents—Beth Hammack of Cleveland, Lorie Logan of Dallas, and Neel Kashkari of Minneapolis—broke with the easing bias and issued an unusually direct warning that the supply shocks from the Iran war could exacerbate inflation. Logan went on to mention the possibility of “prolonged or repeated” disruptions in the Middle East. It’s difficult to interpret those claims as anything other than a technical dispute. They sound anxious.
The United States’ national debt has surpassed $39 trillion, and the war is costing the country about $12 billion every week. The supply of commodities that most Americans never consider, like aluminum, fertilizer, and helium, is becoming more difficult to obtain. In April, the New York Fed’s Global Supply Chain Pressure Index shot up to 1.82, the highest level since 2022. The bank’s president, John Williams, publicly likened it to the shocks that followed the pandemic. It’s not a lighthearted comparison coming from him.
China is another. Since the start of the war, the renminbi has gained value, making it the only significant energy importer’s currency to do so. Ten-year yields in China are still at 1.8%. In exchange for oil, Iran has been covertly taking cryptocurrency and yuan. Recently, the UAE announced that it was leaving the pricing orthodoxy of OPEC. By themselves, none of these are earthquakes. When combined, they create a gradual tilt that is easy to ignore week by week but more difficult to ignore over the course of a year.
It’s remarkable that Treasury, the stewards of the dollar, who are in the best position to discuss this, aren’t. The financial equivalent of refusing to look down on a high ledge, there is a feeling that admitting the strain would itself accelerate it. According to a cautious Chatham House analysis released in April, the dollar’s resilience might be more a reflection of America’s rise to become the world’s leading producer of gas, oil, and weapons than of the currency’s inherent strength. That is not a foundation, but rather a conjunctural cushion.
The difference between the official confidence and the private uneasiness is what sticks with you as you watch this play out. The value of the dollar is not declining. It most likely won’t, at least not during any period of time that coincides with a news cycle. However, a daily index does not reflect the ways in which the foundations are changing. Hedging is being done by allies. The system is being circumvented by adversaries. Additionally, three Fed voters have already given up on the idea that everything is under control. It’s not exactly denial when the Treasury remains silent. It’s more subdued and perhaps more revealing.