Traders turned bullish on the US dollar for the first time this year, a shift fueled by the war in the Middle East and soaring energy costs. Hedge funds and asset managers increased their net long dollar positions by $6.2 billion as of March 17, according to CFTC data. This reversal follows months of net short positions, marking a significant change in sentiment within the $9.5-trillion-a-day forex market.

The dollar's strength coincides with a Bloomberg gauge rising about 2% in March, nearing its best monthly performance since July. $6.2 billion represents the scale of the position reversal. Traders are repositioning after accumulating roughly $22 billion in short dollar bets in mid-February. The currency's sensitivity to oil prices and its status as a haven are key drivers.

A shock event like the Iran conflict prompts investors to de-risk, offloading short positions, as noted by BMO Asset Management's Bipan Rai. 50% now reflects the probability of a Fed rate hike by October, up from bond traders' earlier expectations. JPMorgan strategists, previously bearish, now see the dollar as a top defensive asset. The Bloomberg Spot Dollar Index gained 0.5% on Friday, underscoring the trend.