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The U.S. dollar surged on Monday, climbing to a five-week high as investors rushed into safe-haven assets following U.S. and Israeli military strikes on Iran, which sharply escalated geopolitical tensions in the Middle East.
By 04:45 ET (09:45 GMT), the Dollar Index — which measures the greenback against a basket of six major currencies — was up 0.6% at 98.187, its strongest level since late January.
Dollar boosted by Middle East escalation
Demand for the dollar intensified after the United States and Israel launched coordinated strikes on Iran over the weekend, killing Supreme Leader Ayatollah Ali Khamenei. Hostilities continued into Monday, with Iran retaliating through missile attacks that triggered explosions across Israel and several Gulf states, including the UAE, Qatar, Bahrain and Kuwait.
U.S. President Donald Trump said military operations would continue “for as long as necessary,” reinforcing fears of a prolonged regional conflict and prompting investors to seek refuge in traditionally safe assets such as the dollar.
Euro and sterling weaken; Swiss franc surges
In Europe, the euro came under pressure, with EUR/USD falling 0.6% to 1.1741. Concerns that the Middle East conflict could drive energy prices sharply higher weighed on the single currency, given the euro zone’s reliance on energy imports.
Sterling also retreated, with GBP/USD down 0.8% at 1.3375.
The Swiss franc, another classic haven, saw strong inflows. EUR/CHF slipped 0.3% to 0.9055, as the franc strengthened to its highest level against the euro in more than a decade.
Yen weakens as oil prices surge
In Asia, USD/JPY climbed 0.7% to 157.07. The yen weakened as investors assessed the impact of soaring crude prices on Japan’s energy-heavy import bill. Rising geopolitical uncertainty is also expected to encourage the Bank of Japan to take a more cautious approach to monetary tightening, reducing the likelihood of a near-term rate hike.
Elsewhere, USD/CNY rose 0.4% to 6.8842, rebounding from 34-month lows reached last week. The Australian dollar, typically sensitive to global risk sentiment, fell sharply, with AUD/USD down 0.7% to 0.7069 as higher oil prices and global uncertainty hit appetite for risk-linked currencies.
With geopolitical risks intensifying and energy markets under strain, currency markets remain firmly in risk-off mode, keeping the U.S. dollar and other havens well supported.
