Global FX: The best escalation and recovery candidates
J.P. Morgan Global FX Strategy discusses the dollar and FX outlook following Iran developments, identifying best escalation and recovery candidates in DM and EM, as recorded on March 6, 2026.
What the desk is arguing
The desk argues that geopolitical tensions from Iran developments create opportunities for both escalation and recovery trades in FX markets. They advocate for a top-down dollar view, suggesting that safe-haven flows may boost the USD in the near term, but eventual de-escalation could reverse these gains.
They identify specific DM and EM currencies as candidates for sharp moves in either direction, likely favoring trades based on risk-on/risk-off shifts. The implicit counterfactual is that Iran tensions will not escalate into a broader conflict, allowing recovery trades to materialize.
How firms align with this view
Key takeaways
- 01Iran developments drive near-term USD strength, but de-escalation may reverse gains.
- 02DM and EM currencies offer both escalation and recovery trade opportunities.
- 03J.P. Morgan provides a top-down framework for navigating FX amid geopolitical risk.
Market implications
Expect heightened FX volatility with a risk-off bias initially, favoring USD and CHF. De-escalation could trigger short-covering in EM and commodity currencies. JPY may also see safe-haven demand.
Risks to this view
Escalation of Iran conflict, oil price spike, or central bank intervention could invalidate recovery trades. Conversely, rapid de-escalation may surprise the market.
We discuss the top down dollar/ FX view following developments in Iran and outline the best escalation and recovery candidates in DM and EM. Speakers Meera Chandan, Global FX Strategy James Nelligan, Global FX Strategy Patrick Locke, Global FX Strategy Arindam Sandilya, Global FX Strategy Anezka Christovova, Head of EMEA EM Local Markets Strategy This podcast was recorded on 06 March 2026. This communication is provided for information purposes only.
Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-5227665-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2026 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P.
Morgan. It is strictly prohibited to use or share without prior written consent from J.P. Morgan any research material received from J.P.
Morgan or an authorized third-party (“J.P. Morgan Data”) in any third-party artificial intelligence (“AI”) systems or models when such J.P. Morgan Data is accessible by a third-party.
Sources & References
How we cover this story