Bank of America analysts say the U.S. dollar's recent strength stems from oil price spikes caused by the Iran conflict, not concerns about American government stability. The Dollar Index climbed 0.3% to 90.01, hovering near three-month highs as tensions in the Middle East escalated following U.S. and Israeli strikes against Iran.

Oil prices surged as the conflict widened across the Middle East, disrupting crucial energy supplies through the Strait of Hormuz. About one-fifth of global oil and liquefied natural gas passes through this narrow waterway, creating a significant chokepoint. President Trump suggested the U.S. could insure and escort vessels to relieve the bottleneck.

Unlike previous dollar fluctuations driven by trade tariffs or geopolitical threats, this rally reflects traditional 'risk off' behavior. Investors aren't changing U.S. allocations or hedging against policy missteps. BofA strategists expect the dollar to remain strong in the first quarter due to resilient economic data, though they anticipate a decline later.