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The U.S. dollar stabilized on Monday after earlier gains, as investors reacted to signs of potential de-escalation in the Middle East following a pause in planned U.S. military action against Iran.
By 08:05 ET (12:05 GMT):
- The U.S. Dollar Index dipped 0.1% to 99.59
- EUR/USD slipped 0.1% to 1.1560
- GBP/USD rose 0.2% to 1.3373
Trump delays strikes after “productive” talks
The dollar eased slightly after President Donald Trump announced a five-day postponement of missile strikes targeting Iranian energy infrastructure.
In a social media post, Trump described recent discussions aimed at ending hostilities as “productive,” adding that talks would continue throughout the week. Based on this progress, he instructed the Pentagon to delay any immediate military action.
This marks a shift from earlier warnings that the U.S. would strike Iran’s energy sector if the Strait of Hormuz was not reopened.
Strait of Hormuz remains key risk
Despite the pause, the situation remains fragile. The Strait of Hormuz—through which roughly 20% of global shipping flows—continues to be a central flashpoint.
Threats of Iranian attacks on vessels have:
- Effectively halted shipping traffic
- Disrupted global energy supplies
- Raised concerns over inflation shocks and slower growth
These dynamics had previously supported the dollar through safe-haven demand.
Conflicting signals cap market moves
Gains in risk sentiment were tempered after Iranian state-linked media denied any direct or indirect negotiations with the United States.
Reports indicate that:
- Communication between the two sides remains limited and indirect
- The U.S. pause may reflect deterrence rather than diplomacy, following Iranian threats of retaliation
The lack of clarity around negotiations has prevented a stronger shift away from defensive positioning in currency markets.
Dollar outlook tied to geopolitics and inflation
The dollar’s recent strength has been driven by:
- Safe-haven demand amid geopolitical uncertainty
- Expectations of higher-for-longer interest rates due to energy-driven inflation
While the latest developments have introduced some optimism, markets remain cautious.
Outlook
In the near term, the dollar is likely to remain sensitive to:
- Further developments in U.S.-Iran relations
- Stability in oil prices
- Shifts in inflation expectations and central bank policy
For now, the greenback appears to be pausing rather than reversing, as investors balance early signs of de-escalation against ongoing geopolitical risks.
