The dollar index rose above 100.3 on Friday, its highest level since mid-May 2025, and was set for a second straight weekly gain as investors continued to favor the greenback as a safe haven amid the escalating conflict with Iran and dim prospects for a near-term resolution. US Defense Secretary Pete Hegseth told reporters that the United States would launch its largest wave of strikes against Iran to date on Friday.
Oil prices also rebounded after an early pullback, holding near their highest levels since 2022. Investors increasingly view the US as relatively better positioned than other major economies, owing in part to its higher degree of energy independence.
The Federal Reserve is set to decide on monetary policy next week. While no change to the federal funds rate is anticipated, markets will be parsing the decision and accompanying communications for signals on the policy outlook for the rest of the year, particularly how officials assess the inflation path in light of the recent surge in energy prices. Current market pricing reflects expectations for just one Fed rate cut in 2026.
