Global oil prices moved higher on Monday as the US dollar weakened. Brent North Sea crude futures for March delivery rose by more than 0.5% to $64.49 per barrel, peaking at $64.52. US West Texas Intermediate also climbed by about 0.5% to $59.96 per barrel. The US dollar index fell by 0.62% to 98.44, bolstering demand for commodities and making oil cheaper for buyers who pay in dollars.
The inverse correlation between the greenback and oil prices reflects simple economic logic: when the American currency weakens, dollar-priced goods become cheaper for foreign purchasers, lifting demand. That dynamic is particularly relevant for emerging markets, which are major consumers of energy. The decline of the dollar also signals that investors expect the Federal Reserve to cut interest rates further.
Pierre-Olivier Gourinchas, the IMF’s chief economist, previously warned of a geopolitical risk: the start of a full-scale US military operation in Iran, which has been gripped by mass protests amid an economic crisis, would send oil prices sharply higher. A closure of the Strait of Hormuz, through which much of the world's energy supply flows, would pose a critical near-term risk to the global oil market, he estimated.
