On Monday, March 2, 2026, USD/JPY surged past 157.50, achieving an increase of over 0.5% during the session and approaching the monthly high of 157.30 established in late February — a threshold that was surpassed intraday as the pair advanced toward 158.00. The U.S. Dollar Index experienced a notable increase of 0.6–0.89%, reaching levels between 98.20 and 98.70, marking its highest value in over five weeks. This surge followed the assassination of Iran’s Supreme Leader Ayatollah Ali Khamenei during a coordinated military operation by the U.S. and Israel, which instigated one of the most significant shifts towards safe-haven assets in recent foreign exchange history. The greenback emerged as the strongest major currency for the day, appreciating by 0.82% against the New Zealand Dollar, 0.74% against the Australian Dollar, 0.73% against the British Pound, 0.70% against the euro, and 0.52% against the yen. The yen, recognized as a conventional safe-haven currency, was unable to maintain its momentum. Oil has surged significantly, reaching levels above $78. Brent poses a significant risk to Japan’s economy, which relies heavily on imports. This vulnerability is contributing to the upward movement of USD/JPY, despite the Bank of Japan indicating ongoing tightening measures.
This action presents a paradox at its core. Both the U.S. dollar and the Japanese yen serve as conventional safe-haven currencies. During a typical risk-off scenario — such as a credit crunch, banking crisis, or growth scare — the yen generally appreciates in value alongside the dollar, leading to USD/JPY often moving sideways or even declining as these two safe-haven currencies balance each other out. This situation is unique. The current crisis, characterized by a Middle Eastern war that has closed the Strait of Hormuz and pushed Brent crude prices above $78, creates a structural advantage for the dollar compared to the yen. This is primarily due to a significant asymmetry: the United States holds the position of the world’s largest oil producer. Japan relies on imports for nearly all of its crude oil and a significant portion of its LNG. Each $10 rise in oil prices expands Japan’s energy trade deficit, negatively impacts corporate margins beyond the export sector, constrains household purchasing power, and adds complexity to the Bank of Japan’s already challenging policy considerations. Brent experienced an intraday increase of up to 13%, surpassing $82 a barrel, before closing in the range of $78–$79. WTI reached a peak of $75 before declining to $72. European natural gas prices on the TTF benchmark surged 46% after QatarEnergy suspended LNG production due to Iranian drone strikes on the Ras Laffan complex. Japan stands as a significant player in the global LNG import market, with recent reports indicating a substantial increase in the costs of its spot cargoes. The dollar gains from the United States’ energy independence, while the yen is adversely affected by Japan’s reliance on energy imports. The observed asymmetry explains the unilateral movement of USD/JPY, even though both currencies possess safe-haven characteristics.
The magnitude of the military operation is remarkable. During the weekend of February 28–March 1, the U.S. and Israel initiated “Operation Epic Fury,” targeting over 2,000 locations throughout Iran, which encompassed missile sites, naval installations, command centers, air defenses, ships, and ports. Forty-eight Iranian leaders faced execution, among them Khamenei — a pivotal figure whose demise disrupts long-standing power structures in Tehran. President Trump stated that operations are “ahead of schedule” and outlined a timeline of four to five weeks, with regime change as the clear goal. Iran’s response has been intense. Tehran targeted locations throughout Saudi Arabia, the UAE, Bahrain, and Kuwait. Hezbollah has initiated missile launches from Lebanon. Saudi Aramco’s Ras Tanura refinery, with a capacity of 550,000 barrels per day, was targeted by drones and subsequently shut down as a precautionary measure. Israeli gas fields, such as Leviathan and Tamar, have ceased operations. Iraqi Kurdistan has halted oil production by 200,000 barrels per day. The Strait of Hormuz, a critical passage for 20% of global oil and 20% of global LNG, is currently rendered impassable, with over 200 tankers immobilized and shipping companies declining to transit through the area. For Japan, which relies on Middle Eastern crude and LNG imports that pass through the strait, this represents a dire energy security situation. The pricing is being reflected directly in USD/JPY. In addition to geopolitical factors, Monday’s ISM Manufacturing PMI underscored the dollar’s inherent strengths. The February reading registered at 52.4, a slight decline from January’s 52.6, yet it remains well above the 50 expansion threshold and surpasses the consensus forecast of 51.8. The U.S. manufacturing sector is experiencing growth, whereas Europe’s industrial base is grappling with an energy price shock, and Japan’s manufacturers are dealing with rising input costs from crude oil and LNG.
The ongoing economic resilience maintains the Federal Reserve’s position in a hawkish stance. The CME FedWatch tool indicates a mere 4.4% likelihood of a rate cut in March to the 3.25–3.50% range, while a substantial 95.6% of participants are anticipating rates to remain steady at 3.50–3.75%. In January, the core PPI recorded a significant increase of 0.8% month-over-month. Core PCE for January 2026 indicated that inflation remains persistent at 3.1%. The administration’s Section 122 universal 10% tariffs — with potential escalation to 15% — introduce an additional inflationary factor. With oil now at $72–$78+, inflation expectations have changed significantly to a more hawkish stance in just 72 hours. The prolonged higher rates in the U.S. compared to a Bank of Japan that has only just started tightening create a significant interest rate differential that strongly favors the dollar. This differential acts as a powerful force driving USD/JPY upward. BoJ Deputy Governor Ryozo Himino conveyed assurance earlier Monday that the central bank could elevate interest rates towards neutral, even in the event that headline inflation dips below 2%. Japan’s core inflation has surpassed the BoJ’s 2% target for more than two years, and the latest “Shunto” wage negotiations have resulted in the most significant pay increases in decades — exactly the wage-price spiral that the BoJ has recognized as essential for normalization. Market participants are indicating a strong likelihood of a rate hike by the BoJ in the upcoming quarters. At this moment, none of it holds significance. The interest rate differential between the U.S. and Japan, even following a possible BoJ action, would still be historically significant. Japan’s policy rate remains close to zero, in contrast to U.S. rates, which are positioned between 3.50% and 3.75%. A 25 or even 50 basis point increase by the BoJ has minimal impact on that disparity. The marginal increase in yield fails to offset the substantial influx of safe-haven capital into the dollar. A chief currency analyst located in Tokyo stated clearly: in the hierarchy of foreign exchange drivers, the prevailing global risk-off sentiment takes precedence over relative central bank policy. The Bank of Japan’s hike is already factored into the market. The demand for the dollar is a dynamic, flow-driven occurrence that surpasses it.
The significant intervention campaign by the Ministry of Finance in autumn 2022, when USD/JPY exceeded 151, is still vividly remembered. Japanese officials have not explicitly set a boundary at current levels; however, the apprehension surrounding potential intervention is palpable and acts as a subtle ceiling for the pair around 157–158. The implied volatility in USD/JPY options has surged, with one-month pricing indicating considerably greater anticipated fluctuations compared to the beginning of the year. The heightened volatility premium indicates that the market recognizes the potential for upward movement, yet remains aware that abrupt changes from regulatory measures could lead to significant disruptions. The opposing view: the intervention in 2022 sought to protect a yen that was declining as a result of yield differentials during a period of stability. Taking action to bolster the yen amidst an ongoing conflict in the Middle East — where the dollar’s robustness is fueled by genuine safe-haven demand rather than mere speculation — would be akin to contending with a significantly greater force. Tokyo might opt to accept a higher USD/JPY in light of a geopolitical crisis instead of depleting foreign reserves in what could be an ineffective defense. The interventions in 2022 necessitated several rounds and involved hundreds of billions of yen in foreign exchange sales. The prevailing conditions indicate that an even greater level of resources will be required.
The technical landscape has transitioned to a distinctly positive outlook. The USD/JPY has surpassed the descending resistance line established from the January 23 peak of 159.26, a threshold that had limited upward movements during February. The pair is currently positioned significantly above the 20-day Exponential Moving Average, standing at 155.50. The recent close above the 20-day EMA indicates a resurgence in buying interest following last month’s decline. The 14-day RSI is rising towards 60, indicating a strengthening momentum while still remaining below overbought conditions at this stage. The pair remains positioned above all significant moving averages: the MA-20 at ¥154.58, the MA-50 at ¥155.76, and the MA-200 at ¥153.15. The Ichimoku Kijun level at ¥154.82 serves as immediate support. The daily chart indicates a buy signal from the MACD. The Commodity Channel Index and Bull/Bear Power indicate a strong presence of buying strength. The Awesome Oscillator indicates a bullish trend. Stochastic RSI at 97.36 indicates overbought conditions on a tactical basis. However, in a trending market influenced by a fundamental catalyst of this significance, overbought readings frequently endure instead of prompting immediate reversals. The Dollar Index has surpassed the resistance level of 98.00–98.15 and is currently making efforts to establish a position above 98.70. A successful hold sets the next target at 98.90–99.05. The RSI on DXY indicates overbought conditions, yet momentum continues to be robust. Support is established at 97.76 and 97.56.