The US Dollar climbed to its highest level in a week on Monday as escalating tensions between the United States and Iran pushed investors toward safe-haven assets.
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The move followed reports that Washington had seized an Iranian cargo ship accused of breaching a naval blockade, while Tehran warned of retaliation and ruled out participation in a second round of talks ahead of the expiring ceasefire.
Analysts said the renewed geopolitical uncertainty has revived risk aversion in global markets. “The escalation brings back a geopolitical risk premium just as markets had started pricing in a peace dividend,” said market strategist Charu Chanana.
The US Dollar Index, which tracks the greenback against six major currencies, rose to 98.38, hovering near a one-week high. The euro slipped 0.14% to $1.1746, while the British pound fell 0.29% to $1.3479. Risk-sensitive currencies such as the Australian dollar also weakened.
Energy markets reacted sharply to the developments. Oil prices surged as concerns grew over supply disruptions linked to instability in the Strait of Hormuz, through which roughly a fifth of global oil shipments pass.
Brent crude jumped 7% to $96.8 per barrel, while West Texas Intermediate rose more than 8% to $90.74 per barrel.
Market participants said hopes for renewed diplomacy between Washington and Tehran have faded, increasing the likelihood of continued volatility. “For now, we may see further downside in risk assets as uncertainty persists,” said Nick Twidale of ATFX Global.
In currency markets, the Japanese yen weakened to 159.06 per dollar, nearing levels that could prompt intervention by authorities in Japan.
Cryptocurrencies also edged lower, with Bitcoin down 0.56% and Ethereum slipping 0.2%.
Investors are now closely watching geopolitical developments and upcoming central bank decisions for further direction in global markets.
