FX.co ★ Dollar Advances on Middle East Escalation

The dollar index rose to about 98.3 on Monday, recovering part of last week’s losses as renewed US–Iran tensions boosted demand for the safe-haven currency. President Donald Trump said the US Navy fired on and seized an Iranian-flagged cargo ship in the Gulf of Oman after it ignored orders to stop while leaving the Strait of Hormuz. In response, Tehran reversed its plans to reopen the strait following Washington’s refusal to lift the blockade on Iranian ports and indicated it would not participate in a second round of talks. The protracted conflict has triggered a sharp energy supply shock, heightening inflation risks and increasing the likelihood of further central bank rate hikes, while reducing expectations for Federal Reserve rate cuts this year. The Fed is now widely expected to leave its policy rate unchanged this month and to hold steady for the remainder of 2026.