US President Donald Trump has imposed a 25% tariff on any country that does business with Iran. He announced this decision on Truth Social, and it took effect immediately. Following this announcement, the US Dollar Index (DXY) dipped by 0.24%, trading around 98.90. This index tracks the value of the US dollar against several other currencies.

Global Significance of the US Dollar

The US Dollar is the official currency of the United States and is widely used around the world. It makes up over 88% of all global foreign exchange activity, averaging $6.6 trillion each day as of 2022. The Federal Reserve influences the value of the US Dollar mainly by changing interest rates. In extreme situations, it can use quantitative easing, which often weakens the dollar. Conversely, quantitative tightening occurs when the Federal Reserve stops buying bonds, which usually strengthens the dollar. FXStreet offers this information for your reference and encourages thorough research before making investment decisions. Their content includes forward-looking statements and is not investment advice. FXStreet is not liable for any errors, omissions, or consequences arising from the use of this information, nor do they provide personalized recommendations.

Market Volatility Insights

With the new 25% tariff, we expect to see significant market volatility in the coming weeks. The CBOE Volatility Index (VIX), known as the market’s “fear gauge,” rose 15% to 22.5 in overnight trading, its highest level in three months. For traders, this means taking long positions on volatility through VIX futures or call options could be profitable as uncertainty spreads in the market. The most immediate effect is on crude oil since Iran is a major supplier. West Texas Intermediate (WTI) crude is already rising, and we expect this trend to continue as supply disruptions become more likely. The implied volatility on WTI options has soared, indicating that traders expect larger-than-usual price fluctuations, making long call options an appealing strategy to benefit from potential gains. The US dollar is showing weakness because these tariffs may negatively impact the American economy and strain relationships with key partners. In 2025, World Trade Organization data revealed that the EU and China had over $55 billion in trade volume with Iran, making them primary targets of this new policy. Therefore, we see opportunities to short the dollar against the Euro or Swiss Franc by using futures or options to speculate on further declines in the DXY. Looking back at the US-China trade disputes from 2018 to 2019, we saw that tariff announcements led to long-lasting risk aversion and hindered global growth. This past experience suggests that the current situation may also exert pressure on US equity markets, particularly for multinational corporations with complex global supply chains. We are considering buying put options on broad market indices like the S&P 500 as a hedge against a potential downturn. We’ll also monitor companies in the industrial and automotive sectors, especially in Germany and Japan. Last year’s trade statistics showed that these sectors have significant business dealings in Iran, making them vulnerable to the impact of US tariffs on their home countries. This creates specific opportunities to use put options on individual stocks that are heavily exposed. Create your live VT Markets account and start trading now.

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