The conflict in the Middle East has seen oil prices rise, equities fall slightly, and investors flock to safe haven assets. In times of turmoil, investors often seek the stability of the U.S. dollar (USD) because of its reserve currency status and liquidity, as well as the perceived credit strength of the U.S. This episode of geopolitical uncertainty is proving to be no different with the USD gaining strength relative to global peers.  

Historically, the performance gap between U.S. equities and the rest of the world has hinged on the relative strength of the USD. While a weaker USD makes U.S. exports more competitive, this has often coincided with the outperformance of major non-U.S. indices on a relative basis. That pattern has been evident over the last year, with international equity benchmarks outperforming the S&P 500.

In our view, signs of USD stabilization suggest the tailwind from dollar weakness to non‑U.S. outperformance has likely peaked. The USD is near its highest level since May 2025, and the combination of sticky inflation, U.S. energy independence and resilient growth could limit further dollar softness and challenge the recent leadership of international markets. Diversifying across geographies and asset classes remains prudent to capture potential upside amid today’s varied global conditions.