The U.S. dollar ticked up on Monday, hitting its highest level since May last year, as the currency continued to be an attractive safe haven bet for investors amid further escalation in the fighting in the Middle East.
At 17:18 ET (21:18 GMT), the US Dollar Index, which tracks the greenback against a basket of six major peers, rose 0.4% to 100.51. The gauge was also on pace for its biggest monthly increase since July 2025.
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War escalates as Trump threatens Iran infrastructure Despite further assertions by Trump and his administration on Monday that negotiations to end hostilities were ongoing with Iran, events continued to escalate on the ground.
Yemen’s Houthi group entered the fray over the weekend, attacking Israel and sparking further concerns about oil supply disruptions due to the group’s ability to attack ships passing through the Red Sea. The vital Strait of Hormuz, a key waterway through which a fifth of the world’s oil and gas supply flows, continues to remain effectively shuttered by Iran.
Meanwhile, Trump threatened to strike key Iranian energy infrastructure and the critical Kharg island if the country did not reach a deal with the U.S.
The president said the U.S. was in "serious discussions with A NEW, AND MORE REASONABLE, REGIME to end our Military Operations in Iran."
"Great progress has been made but, if for any reason a deal is not shortly reached, which it probably will be, and if the Hormuz Strait is not immediately ’Open for Business,’ we will conclude our lovely ’stay’ in Iran by blowing up and completely obliterating all of their Electric Generating Plants, Oil Wells and Kharg Island (and possibly all desalinization plants!), which we have purposefully not yet ’touched,’" Trump added.
The White House later reaffirmed that talks with Iran were "continuing and going well."
The U.S. dollar has been viewed as a relative bastion for investment during the ongoing crisis. Some investors have argued that the U.S. being a net exporter of oil may help to insulate the world’s largest economy.
"Barring any clear, conciliatory messages from the Iranian side, it is hard to see the dollar handing back this month’s gains anytime soon," analysts at ING including Chris Turner and Frantisek Taborsky said in a note.
Powell says long-term inflation expectations ’well anchored’ Also in focus on Monday was Federal Reserve Chair Jerome Powell. The central bank chief said inflation expectations appeared to be "well anchored" beyond any potential short-term spikes due to surging oil prices.
Powell said monetary policy was in a good place to “wait and see” the effects of surging oil prices on U.S. inflation and the economy, adding that the central bank did not know what the impact would be.
"Inflation expectations do appear to be well anchored beyond the short term," the Fed chief said, adding that the right move was to look past energy supply shocks.
According to the CME FedWatch tool, traders are no longer pricing in any Fed rate cuts this year, though modest expectations for rate hikes were trimmed after Powell’s comments. Higher interest rates tend to strengthen the dollar.
