Oil surges and dollar gains following US-Iran clashes and Hormuz closure
Escalating military strikes between the United States and Iran have prompted the closure of the Strait of Hormuz, driving up crude prices and boosting the dollar as investors brace for impending U.S. inflation data.
Crude oil prices climbed and the U.S. dollar strengthened in Asian trading on Monday following a weekend of heavy military exchanges between the United States and Iran. Tehran announced it had closed the Strait of Hormuz after targeting American facilities across Gulf states on Sunday.
Brent crude futures jumped 3.3% to $78.49 a barrel as markets reopened to the geopolitical shock, highlighting the vulnerability of global energy supplies. The greenback also found safe-haven support, with the U.S. dollar index holding steady at 101.07 after touching its highest level since July 8.
The dollar advanced 0.1% against the Japanese yen to 161.92. European and commodity currencies softened, with the euro and British pound each slipping 0.1% to $1.1403 and $1.3383, respectively. The Australian and New Zealand dollars also retreated 0.1% to $0.6942 and $0.5757.
Risk sentiment in digital assets cooled slightly amid the broader uncertainty. Bitcoin fell 0.6% to $63,770.42, while ether declined 1.1% to $1,801.28.
Market participants are now shifting focus to a heavy week of U.S. macroeconomic data that could dictate the Federal Reserve's next moves and influence global capital flows. Traders are bracing for the release of the consumer price index on Tuesday, followed by the producer price index on Wednesday.
Federal Reserve Chair Kevin Warsh is also scheduled to testify before the House and Senate. Westpac analysts noted in a research report that inflation risks will remain the primary focus for investors during this period.
In Japan, the central bank is preparing to adjust its economic outlook amid currency pressures. The Bank of Japan is expected to revise upward its economic growth forecast for fiscal 2026, according to three sources familiar with the institution's thinking.
Policymakers are also maintaining a close watch on the potential for inflation to overshoot targets. Rising import costs driven by a weak yen, combined with robust artificial intelligence demand, are offsetting some of the declines in oil prices, according to the sources.
