The US dollar posted notable gains during Thursday trading, supported by renewed demand for safe haven assets as geopolitical tensions escalated following statements from President Donald Trump about intensifying military operations against Iran in the coming period.
The dollar index climbed to 100.03, up around 0.4 percent, reflecting a sharp shift in investor positioning after markets had earlier leaned toward risk assets amid temporary signs of easing tensions between Washington and Tehran.
That shift proved short lived, as Trump’s firm remarks regarding the proximity of US strategic objectives and the targeting of Iran’s nuclear and military capabilities brought caution back into the market, prompting capital to rotate once again toward the dollar as a hedge against rising uncertainty.
Regarding the Strait of Hormuz, visibility remains limited on the timeline for reopening shipping lanes, increasing market sensitivity to any developments, especially given the importance of the route for global energy flows. While there are indications of coordination between Iran and Oman to regulate vessel movement, proposals to impose transit fees add another layer of complexity.
Oil prices continued their upward trajectory at the start of the week in Asian markets, driven by strong momentum from the previous session and close monitoring of the US deadline for reopening the strait. Brent hovered near 110.77 dollars per barrel, while WTI remained firm around 111.95 dollars, reflecting heightened supply risk premiums.
On the supply side, OPEC plus announced a modest output increase for May, though its immediate impact is expected to be limited due to ongoing logistical constraints. At the same time, sustained strength in oil prices is reinforcing inflation concerns globally, with higher energy costs likely to feed into transportation and manufacturing, adding pressure on the broader economy if tensions persist.
Attention now turns to upcoming US labor market data, which will play a key role in shaping expectations for monetary policy, particularly as the Federal Reserve continues to signal that long term inflation expectations remain stable despite volatility in energy markets.
Recent labor data presents a mixed picture, with lower than expected jobless claims alongside rising layoffs and a decline in job openings, leaving markets to interpret a set of uneven signals that require careful assessment in the period ahead.
Across major currencies, the stronger dollar weighed on its peers, with both the euro and British pound facing pressure, while sterling remained more sensitive to rising energy costs. The Japanese yen traded largely flat, while the Australian dollar found support from stronger trade data, with exports rising and imports declining, leading to a wider trade surplus.
Stay informed about global markets through our previous analyses. and Now, you can also benefit from LDN company services via the LDN Global Markets trading platform.
