Brad Setser: Iran War and the Future of the US Dollar

Brad Setser assessed the impact of the conflict in Iran on the US dollar, emphasizing that the current situation differs from the shocks of the 1970s. He explained how the present geopolitical tension is shaping global energy markets and, consequently, currency rates. Setser noted that the 1970s shock was directly linked to a sudden rise in oil prices and the monetary policy decisions of the United States at that time. In contrast, he argued that today’s shock exhibits a different dynamic, driven more by disruptions in global supply chains and the rapidly evolving nature of digital financial systems. According to Setser, the US dollar’s (USD) role in this process stands out because it maintains its position as a reserve currency while mitigating the effects of energy price volatility. However, he contended that the dollar’s long‑term value depends on its ability to balance geopolitical uncertainties and global inflationary pressures. In conclusion, Setser stated that the impact of the Iran conflict on the US dollar has a structure distinct from the shocks of the 1970s and that this may shape future monetary policy decisions. This is not investment advice.