Dollar steady amid escalating Middle East war

The dollar ​index was slightly lower at 100.12, while the euro was at $1.1523, while sterling last fetched $1.3211

The dollar was steady on Monday, while the yen flirted with the crucial 160 per dollar level, ​as nervous investors took stock of the escalating Iran war.

With most of Asia and Europe closed for holiday on Monday, liquidity is likely to be thin, with investor focus on the possibility ​of a ceasefire after a media report suggested a last-ditch push from negotiators was underway.

Trump’s latest deadline itself is bearish not because ​investors think war is guaranteed tomorrow if Iran does not open the strait, but because every new ultimatum makes ⁠the disruption look longer, stickier and more macro-negative, said Charu Chanana, chief investment strategist at Saxo in Singapore.

The euro was at $1.1523, while sterling last fetched $1.3211. The dollar ​index was slightly lower at 100.12.

The Australian dollar was 0.3% higher at $0.69045, wobbling near the two-month low that it hit last ​week.

If the strait is reopened fully around that time Trump’s Tuesday deadline), oil will fall sharply ‌and risk ⁠will rally hard, said Prashant Newnaha, senior rates strategist at TD Securities.

However, if the U.S. escalates, expect global markets to reprice sharply. It’s wait-and-watch in what’s turning out to be a binary event, he added.

The closure has caused oil prices to surge well above $100 per barrel, stoking fears of high inflation and upending rates outlooks across the world. Worries about the hit to economic growth have also weighed as stagflation risks swirl.

Traders are now no longer pricing a move from the Federal Reserve well into ​the second half of 2027, compared ​with expectations of two rate ⁠cuts in 2026 at the start of the year.