The U.S. dollar saw a sharp increase against major global currencies following renewed concerns regarding escalating tensions in the Middle East, driven by recent statements from U.S. President Donald Trump.
Escalation Fears Drive Safe-Haven Demand
The dollar's rally was triggered after President Trump's televised address undermined market expectations of a swift resolution to the regional conflict. Trump vowed to conduct more aggressive strikes against Iran within the next two to three weeks, offering no concrete timeline for de-escalation or the opening of the Strait of Hormuz.
Iran responded to these threats by warning the U.S. and Israel of potential "more crushing, broader and more destructive" attacks.
Market analysts noted that the shift in sentiment—from optimism about an end to the war to fear of escalation—fueled a strong bid for safe-haven assets, causing the dollar to strengthen even against traditional havens like the Swiss franc and the Japanese yen.
Currency Market Movements
The dollar index, which measures the greenback against a basket of currencies, climbed 0.46% to 100.02. The market reaction delivered a near full reversal of most G10 currencies' week-to-date gains.
Key currency movements included:
- Against the Swiss Franc: The dollar strengthened by 0.6% to 0.799.
- Against the Japanese Yen: The dollar rose 0.5% to 159.57, nearing the psychologically significant 160 level.
- Major Decline: The Euro fell 0.45% to $1.1536, while the British Pound slid 0.63% to $1.3222.
Scotiabank analysts noted that Trump's address, specifically the mention of intensifying strikes and the possibility of hitting Iran's power plants, was the primary catalyst for the swift market reversal.
Impact on Commodities
Concerns over sustained supply disruption also impacted commodity markets. Following the heightened geopolitical rhetoric, Brent crude futures rose significantly, settling at $109.03 per barrel, reflecting market anxiety over potential oil supply interruptions.
