The dollar index rose toward 99.5 on Tuesday, clawing back part of the previous session’s losses after Iran denied engaging in talks to end the conflict, contradicting President Donald Trump’s assertions. Tehran also announced fresh attacks on US targets, while Israel continued its strikes against Iran, keeping geopolitical tensions elevated.
On Monday, the dollar had faced heavy selling pressure after Trump delayed planned strikes on Iranian energy infrastructure for five days, citing “productive” discussions with Iran over the prior two days. The outcome of any negotiations and the prospects for reopening the Strait of Hormuz remain highly uncertain, and Middle Eastern energy capacity may take time to return to previous levels.
This dynamic heightens the risk of stronger inflation in the coming months and increases the likelihood of interest rate hikes by major central banks. Against this backdrop, investors are now turning their attention to upcoming US manufacturing data for fresh insight into how businesses are coping with elevated geopolitical risks.
