Dollar Strengthens as Markets Await Iran’s Response to U.S. Strikes
The U.S. dollar edged higher on Monday as investors sought safe-haven assets amid rising geopolitical tensions, although the modest gains suggest markets were holding back while awaiting Iran’s response to U.S. airstrikes on its nuclear sites.
The most notable market reaction came in oil, with crude prices surging to a five-month high, while global equity markets slipped following the escalation between the U.S. and Iran. The tension deepened after President Donald Trump floated the idea of regime change in Tehran.
In currency trading:
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The euro dropped 0.33% to $1.1484
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The Australian dollar, seen as a risk-sensitive currency, hit a one-month low, falling 0.67% to $0.6408
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The dollar index rose 0.12% to 99.037, reflecting gains against a basket of major currencies
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British pound declined 0.26% to $1.3416
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New Zealand dollar fell 0.68% to $0.5926
Carol Kong, a strategist at the Commonwealth Bank of Australia, noted that markets were in a “wait-and-see mode”, focusing more on inflationary risks from the conflict than on potential economic slowdown.
“Currency movements will hinge on statements and actions from Iran, Israel, and the U.S.,” she said. “If tensions rise, safe-haven currencies are likely to benefit further.”
The U.S. dollar gained 0.52% against the yen, reaching 146.81, after touching a one-month high earlier. That strength extended across Asia, weighing on regional currencies like the Indonesian rupiah, Malaysian ringgit, and Philippine peso.
Bank of America strategists said the USD/JPY pair could continue to climb if oil prices remain elevated, pointing out that Japan imports most of its energy—over 90% from the Middle East—unlike the more energy-independent U.S.
“USD/JPY serves as an effective hedge against escalating geopolitical risk in the Middle East,” the bank noted.
Iran vowed to retaliate after the U.S. dropped 30,000-pound bunker-buster bombs on its Fordow nuclear facility, while U.S. officials urged Tehran to refrain from further escalation. Protests against the strikes broke out in several American cities.
In a potentially major escalation, Iran’s parliament approved a measure to close the Strait of Hormuz, a critical chokepoint for nearly a quarter of global oil shipments. Final approval lies with Iran’s Supreme National Security Council.
Despite the rising risks, some analysts say markets are treating the U.S. strikes as isolated, not the beginning of a broader war.
“The restrained safe-haven flows suggest investors see this as a one-off event, not yet a major disruption to global trade or oil supply,” said Charu Chanana, chief strategist at Saxo.
Although the dollar has regained some appeal as a geopolitical hedge, broader sentiment remains cautious. The greenback has lost 8.6% this year, weighed down by concerns over Trump’s trade policies and their impact on U.S. growth.
Meanwhile, in crypto markets:
- Bitcoin rebounded 1.75% after a 4% drop on Sunday
- Ether rose 2.3%, recovering from a 9% slide in the previous session
