The U.S. dollar strengthened on Monday as investors sought safety amid heightened tensions in the Middle East, reversing a recent trend of decline for the currency. This move came after U.S. President Donald Trump threatened new strikes on Iran’s electricity grid, dashing earlier hopes for de-escalation and renewing concerns about global energy supplies.
The dollar index, which measures the greenback against a basket of major currencies, rose 0.29% to 99.83. This increase followed the index’s first weekly drop since the start of the conflict, reflecting a rapid shift in market sentiment. The就不是FX) surge underscored a broader move toward safe-haven assets.
In currency markets, the euro fell 0.38% to $1.1526, while the British pound weakened 0.37% to $1.329. The Japanese yen continued its slide, weakening 0.22% to 159.55 per dollar, nearing the psychologically significant 160 level. Commodity-linked currencies also declined; the Australian dollar dropped 0.95% to $0.6956, and New Zealand’s kiwi fell 0.7% to $0.5793. The widespread dollar strength coincided with a sell-off in Asian equities, including a sharp, temporary 5% drop in Japan’s Nikkei 225.
The market reaction follows a shift in expectations for U.S. monetary policy. Prior to the escalation of the U.S.-Israeli conflict in late February, investors had priced in two Federal Reserve interest rate cuts this year. Now, with inflationary pressures mounting from rising oil prices, central banks are seen adopting a more hawkish stance, supporting the dollar.
Geopolitical developments over the weekend directly triggered the financial moves. After briefly signalling a potential winding down of hostilities, President Trump issued a 48-hour ultimatum to Iran, threatening its power grid. In response, Tehran vowed to retaliate against regional infrastructure and confirmed the closure of the Strait of Hormuz, a critical chokepoint for global oil shipments.
The seriousness of the energy threat was underscored by the International Energy Agency (IEA). Its Executive Director, Fatih Birol, warned from Sydney that the current crisis poses a greater threat to the global economy than the combined oil shocks of the 1970s. “No country will be immune,” he stated, highlighting the risk of prolonged supply disruptions.
The conflict intensified further on Monday, with Israel announcing large-scale strikes on Tehran and reports of ballistic missiles launched at Riyadh.
This confluence of geopolitical risk and energy insecurity has abruptly ended a period of optimism in financial markets. The dollar’s rebound reflects a stark reassessment of conflict risks, with investors now pricing in prolonged volatility and a significant threat to global economic stability driven by energy supply concerns.
