The US dollar rose on Monday against the euro, yen, and Swiss franc, driven by higher energy prices and increased demand for safe-haven assets following US and Israeli strikes in Iran, which have raised fears of a prolonged conflict in the Middle East.
Investor attention is focused on the strategic Strait of Hormuz, where shipping has been disrupted by Iranian retaliatory attacks.
The strait serves as a major route for global oil flows, according to global media reports citing the Foreign Exchange Market (Forex).
Experts noted that any sharp and sustained rise in oil prices would heavily impact the economies of Japan and the Eurozone, which rely on crude oil imports, while the US economy is better positioned to adapt, having been a net oil exporter for nearly a decade.
Financial markets experienced notable volatility. The US Dollar Index rose 0.74 per cent to 98.37, its highest level since January. The Swiss franc reached record levels against the euro at 0.9028 and fell to 0.7727 versus the dollar. The euro declined to $1.1721, its lowest level since January, while the Japanese yen weakened 0.61 per cent to 157.005 per dollar after an initial rapid surge.
Analysts at the British bank Barclays indicated that the dollar could strengthen by 0.5 pe cent–1 per cent for every 10 per cent increase in oil prices, noting that the escalation in Iran supports dollar gains through higher energy costs and increased safe-haven demand.
