BofA: Geopolitical Escalation with Iran Expected to Boost US Dollar

Bank of America (BofA) analysts expect the US Dollar to strengthen significantly in the event of a material escalation in tensions between the US and Iran. Market sentiment is shifting, with Polymarket odds of a US military strike against Iran rising to 69% by the end of June. This potential escalation is expected to trigger a 'risk-off' environment, driving investors toward safe-haven assets. BofA specifically recommends shorting the NZD/USD pair as a strategic hedge against these geopolitical risks. The bank notes that higher oil prices and declining global equities typically favor the USD over risk-sensitive currencies like the AUD and SEK. Consequently, the DXY index is likely to see upward pressure as geopolitical uncertainty persists and safe-haven flows accelerate.