The past week has been a period of intense friction and restructuring of macroeconomic dynamics for traditional financial markets (TradFi). The sudden escalation of geopolitical risks in the Middle East shattered the market’s calm expectations for Federal Reserve rate cuts that had persisted since the start of the year. As macro observers at Gate, we focus not only on crypto market volatility but also on the evolving—and often paradoxical—relationships among TradFi’s core assets: the US Dollar Index, US equities, and gold.
US Dollar Index: Dual Boost from Safe-Haven Demand and Hawkish Expectations
This week, the US Dollar Index emerged as the most prominent variable in the TradFi market. As of March 4, the index had rebounded sharply above 98.5, briefly approaching the 99.00 mark and hitting its highest level since late January.
The driving force behind this dollar rally goes beyond the US economy’s relative strength. According to Guomao Futures’ latest report, in the short term, the US-Iran conflict has evolved from military strikes to an energy crisis caused by the blockade of the Strait of Hormuz. This geopolitical shock initially pushes safe-haven capital into the dollar. More importantly, surging oil prices have triggered inflation concerns, which ironically reinforce the dollar’s "anti-inflation" qualities. While this may seem counterintuitive from a traditional economics perspective, in the current environment where global stagflation risks are emerging, higher interest rate expectations are fueling the dollar’s upward momentum.
The research team at CICC also notes that if oil and gas prices continue to rise and supply risks remain unresolved, this theoretically disadvantages energy-importing countries such as the EU. This would force capital to flow back to the US, driving the Dollar Index higher in the short term. However, there is disagreement in the market: if the conflict drags on, worsening US fiscal deficits could undermine the dollar’s long-term reserve status, which is a medium- to long-term risk to watch.
US Equities: Tug-of-War Between Bullish Sentiment and Cautious Observers
Amid geopolitical tensions, US equity market sentiment is unusually divided.
Goldman Sachs strategists remain firmly bullish. Led by Oppenheimer, their analysts advise investors to treat any pullback in US equities as a buying opportunity. They acknowledge that the Middle East conflict and volatility in the AI sector pose "major headwinds," but argue that economic resilience and robust earnings growth will limit the depth of any correction. BTIG’s chief market technician, Jonathan Krinsky, even quoted the old adage: "When missiles fly, time to buy," suggesting that geopolitically driven volatility is often short-lived.
Conversely, Deutsche Bank issued a stark warning: beware of buying too early. Strategist Allen stated that this week’s key question is whether oil prices will surge to levels that hinder economic growth. Only if oil prices rise by at least 50%-100% and stay elevated for several months, prompting central banks to adopt hawkish policies, would the S&P 500 plunge more than 15%. While these conditions have not yet been fully met, risks are accumulating.
Meanwhile, UBS has downgraded its outlook for US equities, citing risks of dollar weakness (short-term logic has shifted, but long-term concerns remain), overvaluation, and the waning advantage of share buybacks. On the trading front, while tech stocks are under pressure, defense and energy sectors have surged, indicating a shift in capital from pure "growth" narratives to sector rotation under a "chaos" theme.
Gold: Dollar Dynamics Temporarily Override Safe-Haven Appeal
Gold’s performance this week was the most dramatic, reflecting the complexity of the current macro environment.
Logically, escalating tensions in the Middle East should drive safe-haven demand for gold. Yet, on March 4, spot gold fell to around $5,136 per ounce, dropping roughly 4% in a single day. The direct culprit was the surging US Dollar Index.
CITIC Futures pointed out that precious metals have entered a tug-of-war between "safe-haven premium" and "repricing of interest rate expectations." On one hand, risks in the Strait of Hormuz provide support; on the other, rising energy prices strengthen expectations of renewed US inflation. This has pushed US Treasury yields higher and the dollar stronger, suppressing the valuation of non-yielding assets like gold. eToro analyst Josh Gilbert also noted that the repricing of interest rate expectations is weighing on gold prices, with dollar strength and rising bond yields forming a classic "double headwind."
Additionally, the market has seen liquidity squeezes. According to analysis cited by Boyi Master, simultaneous declines in equities and bonds have forced some investors to sell liquid assets—including gold—to meet margin calls, further intensifying gold’s short-term volatility.
Despite this, institutional views on gold’s long-term prospects remain unchanged. BNP Paribas has raised its forecast for the average gold price in 2026 by 27% to $5,620 and expects it could break above $6,250 by year-end. Guangfa Securities believes that global geopolitical turmoil and the fragility of the dollar’s credit system due to US debt issues will continue to support gold’s monetary attributes.
Core Relationship Analysis: The Rise of Stagflation Logic
Synthesizing the performance of these TradFi assets, we can outline the current macro market’s central narrative:
| Asset Class | Recent Performance | Core Driving Logic | Outlook for Inter-Asset Relationships |
|---|---|---|---|
| US Dollar Index | Strong rebound above 98.5 | Safe-haven inflows + energy-driven inflation boosting rate expectations | Short-term strength, but long-term constrained by fiscal deficits and de-dollarization |
| US Equities | Intense bull-bear battle, sector divergence | Economic resilience vs. oil price impact on earnings outlook | If oil stays above $100, soft landing expectations may be shattered, triggering a deep correction |
| Gold | High volatility, dropped 4% at one point | Real US rates suppress > short-term safe-haven demand | Strengthened short-term negative correlation with dollar; long-term anti-inflation and decentralization logic intact |
Conclusion
The core market contradiction has shifted from a simple "rate cut expectation battle" to a transmission chain of "geopolitical conflict -> energy shock -> inflation rebound -> reset of interest rate trajectory." The rare simultaneous rally of the dollar and gold (though gold later retreated due to dollar strength) occurred against an extreme macro backdrop of rising systemic risks and mounting pressure on non-US economies.
For crypto market participants, understanding this TradFi context is crucial. If the dollar continues to strengthen on safe-haven demand, it could squeeze liquidity for risk assets—including crypto—in the short term. However, if geopolitical tensions trigger a deep correction in US equities and force the Fed to pivot to easing, the long-tail effect of gold and Bitcoin as "alternative currencies" may reemerge. Gate will continue to track these macro shifts for you.
