--- title: "Market turbulence with nowhere to hide? Under the impact of energy shocks, the dollar's safe-haven aura fades, and cash may become the \"least bad\" choice" type: "News" locale: "en" url: "https://longbridge.com/en/news/280269487.md" description: "The market is shaken by the Iran war, and the safe-haven appeal of the US dollar is weakening, leaving investors with nowhere to hide. Although the dollar has slightly risen against other currencies, funds are mainly held in cash and have not significantly flowed into the US stock or bond markets. Gold and Bitcoin prices have plummeted, and volatility has increased across almost all asset classes. The performance of European and American stock markets has been relatively mild, but if yields in the fixed income market continue to rise, the resilience of the stock market may be difficult to maintain. The interest rate hikes by policymakers and the uncertainty surrounding economic growth prospects will affect the performance of the dollar and other currencies" datetime: "2026-03-24T07:02:59.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/280269487.md) - [en](https://longbridge.com/en/news/280269487.md) - [zh-HK](https://longbridge.com/zh-HK/news/280269487.md) --- > Supported Languages: [简体中文](https://longbridge.com/zh-CN/news/280269487.md) | [繁體中文](https://longbridge.com/zh-HK/news/280269487.md) # Market turbulence with nowhere to hide? Under the impact of energy shocks, the dollar's safe-haven aura fades, and cash may become the "least bad" choice According to Zhitong Finance APP, where should investors hide from the market turbulence caused by the Iran war? Currently, there is no reliable safe haven; even the US dollar, which traditionally benefits the most from risk aversion, has only recorded moderate gains against major global currencies. The funds flowing into the dollar have clearly not been heavily invested in the struggling US stock or bond markets, but rather held as cash. Gold prices have fallen by a quarter from their peak at the end of January; Bitcoin has plummeted over 40% from last October's record high, crushing hopes that cryptocurrencies could provide shelter during crises. Volatility across almost all asset classes has surged significantly. Although the declines in European and American stock markets have been relatively moderate so far, if yields in the fixed income market continue to signal a sharp rise in inflation, the resilience of the stock market may not last. Fairly speaking, asset classes that have recently recorded strong gains can easily become sources of liquidity. For example, gold has still risen 35% over the past year and has accumulated a 130% increase over the past five years; if the conflict continues, central banks that have hoarded gold in recent years may tap into these reserves to meet energy and defense needs. The relatively subdued performance of the dollar can be explained by the sharp rise in interest rate expectations in energy-scarce regions, particularly the Eurozone and the UK. Given the outlook for high energy prices, the euro and pound typically suffer as investors flee; however, the futures market has quickly repriced the policy outlooks of the European Central Bank and the Bank of England, expecting both to take hawkish rate hikes against inflation. The situation in the US is different, with a relatively mild shift in interest rate expectations. The futures market currently believes that the Federal Reserve will remain on hold for the remainder of the year, whereas earlier expectations were for a more accommodative policy. The divergence in official rate outlooks has suppressed the dollar's gains—but the currency market may quickly shift its focus from relative interest differentials to the increasingly deteriorating growth outlook, which will put pressure on the euro and pound. It is difficult to predict whether the European economies, which are suffering from external supply shocks and near-stagnant economic growth, will actually implement multiple rate hikes. If policymakers repeat the mistakes made after the Russia-Ukraine war in 2022, triggering an economic recession or at least a severe economic downturn, it could be a huge error. Four years ago, Western economic demand was still supported by post-pandemic monetary and fiscal stimulus measures, inflation rates quickly rose above targets, and unemployment rates generally fell. Now, the situation is quite the opposite. Moreover, if energy prices remain high, they may suppress demand and even lead to deflation: UBS analysts point out, "The chances of rate hikes may be rising, but the chances of significant rate cuts are also significantly increasing." Fairly speaking, Bank of England Governor Bailey has emphasized that last week's decision to keep rates unchanged does not put policymakers on a path to rate hikes. However, if rate cuts are no longer seen as a given by the market, then a rapid repricing in the opposite direction is understandable. The problem is that when everyone takes the same action at the same time, additional margin calls can exacerbate market volatility and potentially trigger overreactions. Policymakers are highly sensitive to being accused of acting slowly in response to post-pandemic inflation and remain vigilant about any potential lingering effects. Once signs of consumer price pressure begin to accumulate, they will hope to act more quickly this time. However, the extreme volatility in the government bond market recently has already played a role in raising borrowing costs far beyond what the central bank could achieve alone Recently, the yield on 10-year German government bonds briefly exceeded 3%, the yield on Italian government bonds broke through 4%, and the yield on British government bonds climbed above 5%. As a result, mortgage and loan rates have rapidly increased, sending a tightening signal across the entire economy that central banks aiming to curb inflation would welcome. If soaring energy prices trigger a recession, there is no obvious safe haven for investors to weather this potential rollercoaster market, let alone accurately grasp the market rhythm. For investors, holding cash (in US dollars) may be the least bad option at present; however, even for the US dollar as a safe haven, market confidence is not particularly high ### Related Stocks - [BTC/HKD (BTCHKD.VAHK)](https://longbridge.com/en/quote/BTCHKD.VAHK.md) - [BTC/USD (BTCUSD.VAHK)](https://longbridge.com/en/quote/BTCUSD.VAHK.md) ## Related News & Research - [The price of Bitcoin is back below the $70k level and below the 200 and 100 hour MAs](https://longbridge.com/en/news/280360812.md) - [Sweden’s H100 targets Norwegian firms in all-stock Bitcoin deal](https://longbridge.com/en/news/280137466.md) - [11 most undervalued stocks to buy according to analysts](https://longbridge.com/en/news/280096738.md) - [Fed Contends With Iran War Uncertainty](https://longbridge.com/en/news/280179285.md) - [TEHRAN IN CONTACT WITH WASHINGTON DESPITE IRAN'S OFFICIAL DENIAL OF NEGOTIATIONS - NYT](https://longbridge.com/en/news/280365284.md)