Dollar Edges Higher on U.S.–Iran Tensions as Oil Surges On Renewed Supply Fears

Mintesinot Nigussie

The US dollar rose to a one-week high against major currencies on Monday before trimming gains, as renewed tensions between Washington and Tehran and fading expectations of a Middle East peace deal drove demand for safe-haven assets. Market sentiment shifted after the United States said it had seized an Iranian cargo vessel attempting to breach its blockade, prompting Iran to threaten retaliation.

Tehran also signalled it would not take part in a second round of negotiations that Washington had hoped to begin before a two-week ceasefire window expires on Tuesday. Currency moves, however, remained relatively contained despite sharper volatility in energy markets, with the dollar giving back part of its early advance by mid-morning Asian trading.

The dollar index, which tracks the currency against six peers, stood at 98.30, near its highest level in a week and partially recovering losses accumulated earlier in the month. It remains down about 1.5 percent in April, reflecting earlier gains in risk appetite driven by hopes for diplomatic progress.

Energy markets saw a more pronounced reaction, with oil prices extending gains on concerns over supply disruptions. Brent crude rose more than 5 percent to 95.20 US dollars a barrel, while US West Texas Intermediate climbed over 6 percent to 88.99 US dollars.

The war, now in its eighth week, has intensified fears over global energy flows, particularly through the Strait of Hormuz, a key shipping route that typically carries about a fifth of global oil shipments.

Overall, the dollar edged higher on U.S.–Iran tensions as oil surged on renewed supply fears, reflecting how geopolitical developments continue to influence currency and commodity markets.