USD poised to benefit from fragmenting supply chains in Q2
Investing.com — The U.S. dollar could stage a rally in the second quarter as the conflict between the U.S. and Iran, which is also an economic war, reshapes global supply chains and exposes vulnerabilities across energy-dependent economies, according to Macquarie.
Analyst Thierry Wizman argued in a note that the shift from kinetic to economic warfare, characterized by the ongoing U.S. blockade of the Strait of Hormuz, creates conditions that favor the dollar.
"If the economic war endures across Q2, then the risk of key mineral cut-offs and the 'non-linear' effects on the global economic supply chains and economies should support the USD again," the firm says, pointing to the U.S.'s positive net energy balance and the diversified nature of its economy as buffers against supply shocks.
The strain on Asia is said to be particularly acute. Macquarie estimates that crude oil imports to Asia from the Middle East have already fallen roughly 60% versus pre-war levels, with total Asian crude imports down about 30%.
So far, the shock has been cushioned by inventory buffers, with Japan and South Korea having held approximately 224 and 200 days of net import coverage respectively at the war's outset.
But Macquarie flags Australia, with just 33 days of coverage, and India, with roughly nine days of underground strategic reserves, as especially exposed.
The firm cautions that dollar strength is a condition of conflict persistence. It is only after the economic war ends and "assured safe passage of critical goods" is restored that the 2025-era diversification trade away from the dollar can reassert itself, Macquarie says.
Related articles
USD poised to benefit from fragmenting supply chains in Q2
Sterling today: Pound weakens as White House deadline keeps dollar in demand
Key Insights
- This topic is currently trending
- Experts are closely monitoring developments
- It may impact future decisions
