Global markets opened on Monday in a state of deep uncertainty. On Saturday, the United States and Israel launched massive attacks on Iran, in which the country's Supreme Leader, Ayatollah Khamenei, was killed and a significant portion of the Islamic Republic's political and military leadership was destroyed.

Oil and gold prices jumped sharply as the conflict looks likely to become protracted. Iran's response was large?scale: Israel, the US, and NATO bases in several Gulf states were targeted. The dollar also strengthened, remaining the main safe?haven asset in times of uncertainty.

What happens next? It is already clear that Trump's slogan "Make America Great Again" can be interpreted as expansionist. Unilateral imposition of higher tariffs on exports to the US was the first step, followed by pressure on countries that control global resources — primarily oil producers. These include Canada and Mexico, the US's closest neighbors, who have been pressured to cede parts of their sovereignty to American corporations. Greenland is of interest for control of much of the Arctic and to limit Russia's influence in the region. The regime change in Venezuela was carried out successfully, giving the US control over oil production, and now American companies will determine whether that oil goes to China — and on what terms. Iran is another oil supplier to China. Obviously, control over its fields could be achieved if a pro-US government comes to power as a result of the war.

The strike on Iran occurred against the backdrop of nuclear negotiations that, as now appears, were conducted merely to lull vigilance. A policy of force and intimidation is the US's last attempt to preserve global dominance. Markets are in complete uncertainty because the outcome of the Gulf war will determine nothing less than the US's status as a global leader. Accordingly, the dollar's fate as the world's primary currency is now on the line.

Clearly, the bet is on an internal upheaval in Iran, because a military victory without a ground operation is impossible, and the US is not capable of a ground invasion. If power in Iran does not transfer to a pro?US leadership, Iran will not be defeated, and the war's objectives will not be achieved. That question is now the key issue for assessing the dollar's future. Trump is counting on resolving the matter within four weeks — a reasonable assumption, given that missiles for strikes can suddenly run out.

The aggregate USD position against major global currencies increased by $3.2 billion over the reporting week; that rise came at the expense of two European currencies. The euro lost $2.7 billion and the pound $1.2 billion. Note also that all three major commodity currencies (NZD, AUD, CAD) improved their positioning. Despite some improvement, the dollar's outlook has not become more bullish, given the substantial bearish bias.

As for macro data, although their market impact has receded into the background, they remain important. On Friday, the US factory inflation report for January was published, and producer prices were notably higher than forecasts; several indicators exceeded December levels, bringing the risk of rising inflation back onto the agenda. Fed's interest rate expectations remain unchanged for now: CME futures show two rate cuts priced for this year, indicating some stability.

The coming week should add more clarity on the dollar's next moves. To fully assess the war's prospects, much more time is needed. Meanwhile, ISM manufacturing PMI is due today, an ISM services report will be available on Wednesday, and a batch of labor market releases culminating in Friday's nonfarm payrolls.

Current dollar forecast: the only path to a further USD rally is a rapid achievement of Washongton's goals in Iran — i.e., signs of a regime change to a government friendly to the US. If no such signs appear within a week and confidence grows that the war may drag on, pressure on the dollar will increase with each passing day.