The U.S. dollar has emerged as one of the strongest performers among safe-haven assets in the latest bout of uncertainty. The dollar index, which measures the greenback against a basket of six major currencies, has risen about 1.5% during the week. According to Reuters, the U.S. currency has even strengthened against the Swiss franc and the Japanese yen—two currencies that typically benefit during times of market stress. This rebound is notable because the dollar had weakened earlier when equity markets fell during tariff-related turmoil last April, raising doubts about its traditional safe-haven status.
Flow data cited by Reuters indicates that demand has been concentrated mainly in short-term dollar cash rather than in broader U.S. assets. Analysts suggest that the United States’ position as a net energy exporter may also be supporting the currency, especially as benchmark Brent crude oil prices have climbed above $80 per barrel amid geopolitical tensions.
Government bonds, another traditional refuge in uncertain times, have not attracted the typical inflows associated with geopolitical shocks. Instead, bond markets have been driven more by inflation expectations and fiscal concerns. Worries about rising government borrowing and policy changes—such as Germany’s decision to relax its debt brake—have overshadowed the safe-haven appeal of sovereign debt. As a result, yields on Germany’s 10-year Bund, the benchmark for the eurozone, have climbed roughly 14 basis points during the week, reflecting selling pressure rather than defensive buying.
Gold, long regarded as the ultimate hedge during crises, has also displayed volatility in recent days. The precious metal has surged roughly 240% since the start of the decade, reinforcing its reputation as a long-term store of value. However, it experienced a sharp drop earlier in the week. Analysts cited by Reuters attribute the fall partly to investors selling profitable positions in gold to cover losses in other parts of their portfolios after market sentiment deteriorated due to the Middle East conflict.
Despite the short-term swings, analysts maintain that gold’s safe-haven credentials remain intact. Concerns about persistent inflation, geopolitical tensions, and high levels of global debt continue to support the metal’s long-term appeal. Investment firm State Street believes gold remains underrepresented in global portfolios, noting that allocations to gold exchange-traded funds account for less than 1% of global fund assets—far below the 5–10% level often cited as a strategic allocation.
Traditional currency refuges such as the Swiss franc and the Japanese yen have also struggled to gain traction during the latest bout of market turbulence. According to Reuters, the franc has declined about 1.2% while the yen has slipped roughly 0.8% during the week. The yen, however, still appears attractive from a valuation standpoint to some investors, who see potential for it to offer protection if volatility intensifies.Political uncertainty in Japan has added complexity to the outlook for the currency. Concerns have surfaced after Japanese Prime Minister Sanae Takaichi expressed reservations about further interest rate hikes, potentially affecting expectations for monetary policy. Meanwhile, the Swiss franc’s upside may be limited by the Swiss National Bank’s readiness to intervene in currency markets to prevent excessive strength, a factor that analysts say could dilute its safe-haven appeal.
Equity markets have also provided little comfort to investors seeking defensive positioning. Typically, sectors such as utilities and consumer staples decline less during periods of market stress. However, these sectors have underperformed during the latest bout of volatility. In the United States, utilities have slipped about 1% while consumer staples have dropped nearly 2.8% during the week, even as the broader S&P 500 index remained largely flat. In Europe, the declines have been more pronounced, with utilities falling around 3% and consumer staples dropping roughly 4.5%, compared with a 3% decline in the STOXX 600 index.
Market participants say part of the reason defensive sectors have struggled is that they had already been performing strongly before the conflict escalated. Investment trends in recent months had favoured so-called “hard assets” such as infrastructure and industrial companies, leaving valuations in traditional defensive sectors relatively stretched.
Overall, the latest bout of geopolitical tension has highlighted how the behaviour of safe-haven assets is becoming increasingly complex. While the dollar has regained some defensive appeal and gold continues to command long-term confidence, other traditional refuges—from government bonds to defensive equities—have shown that their protective qualities may depend heavily on the broader economic and policy backdrop.