U.S. Dollar Strengthens as Iran Conflict Boosts Safe-Haven Demand
The U.S. dollar strengthened on Thursday, trading near its highest level since April as investors sought safe-haven assets amid growing uncertainty surrounding diplomatic efforts to end the war in Iran.
By 06:17 ET (10:17 GMT), the U.S. Dollar Index, which measures the greenback against a basket of major currencies, had risen 0.2% to 99.36.
At the same time, the euro slipped 0.1% to $1.1614, while the British pound declined 0.2% to $1.3396.
Markets Focus on Inflation Data and Interest Rate Outlook
Investors were also closely watching upcoming U.S. inflation data for further clues about the economic impact of the Iran conflict and the future direction of Federal Reserve interest rates.
The April Core PCE Price Index, the Fed’s preferred inflation gauge, was expected to remain well above the central bank’s 2% annual target.
Recent inflation reports released earlier this month already showed rising price pressures driven largely by higher energy costs.
Oil Prices Surge After U.S.-Iran Escalation
Global markets were shaken after oil prices surged following renewed military strikes between the United States and Iran.
The U.S. military reportedly targeted sites in southern Iran early Thursday, prompting retaliatory attacks from Iran against a U.S. base in Kuwait.
Tensions escalated further after U.S. President Donald Trump dismissed reports suggesting Iran could reopen the Strait of Hormuz within 30 days. Trump also rejected the possibility of Iran and Oman controlling shipping traffic through the strategic waterway.
Additionally, the U.S. Treasury imposed sanctions on an Iranian entity accused of collecting tolls for passage through the Strait of Hormuz.
Oil prices jumped as much as 4% following the attacks, increasing fears that energy-driven inflation could push the Federal Reserve and other major central banks toward a more hawkish monetary policy stance.
Analysts Warn Geopolitical Risks Are Dominating Markets
According to Andreas Lipkow, Chief Market Analyst at CMC Markets, the conflict in Iran is currently overshadowing most other economic factors and making macroeconomic forecasting increasingly difficult.
The continued uncertainty has driven investors toward defensive assets, helping support the U.S. dollar while weighing on broader risk sentiment across global markets.
Yen Near Key Intervention Level
Elsewhere in the currency market, the Japanese yen remained close to the 160 level against the U.S. dollar — a threshold that previously triggered intervention from the Bank of Japan earlier this year.
Japanese officials reportedly warned they are prepared to intervene again if necessary to stabilize the currency.
Meanwhile, the South Korean won weakened after the Bank of Korea left interest rates unchanged at 2.50%, in line with market expectations.
However, policymakers signaled a more hawkish tone under new Governor Shin Hyun-Song, expressing concerns about the inflationary effects of rising oil prices.
