Oil: Correlation with USD questioned – BNY

FXStreetFeb 19, 2026 12:43 PM

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BNY’s Head of Markets Macro Strategy Bob Savage notes that historical positive correlation between Oil and the Dollar is weakening even as Brent trades above $70 and WTI tests $68. Despite a sharp Oil rally since December, iFlow data show mixed USD flows with net Dollar selling. Savage highlights that changing Oil–Dollar dynamics could alter how markets read inflation and fixed income risks.

Oil link to Dollar flows shifting

"The correlation between oil and the USD has been positive over most of the last five years. The U.S. produces the most oil and exports some of it, despite using more than it extracts. The between higher oil prices and a bid dollar has been one factor in explaining why other correlations have been wobbly, such as USD appreciation and equity losses."

"The role of geopolitical risk in oil markets has once again been brought to the forefront of investors’ minds. Fears of a larger-scale disruption to oil markets are linked to the role of Iran and the Strait of Hormuz as a key chokepoint for over 25% of the world’s supply. What stands out about USD flows over the last three months is that oil has not been the driver."

"Whether oil breaks through $68/barrel (WTI) and sparks more fear about inflation going up may be a factor to watch for fixed income markets, but for the dollar the linkage appears to be changing."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Disclaimer: The information provided on this website is for educational and informational purposes only and should not be considered financial or investment advice.

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