BY COMFORT OGBONNA
The U.S. dollar edged higher on Thursday, hovering near a one-and-a-half-week high as escalating tensions between Iran and the United States continued to unsettle global markets. The prolonged standoff, coupled with stalled peace negotiations, has driven oil prices back above $100 per barrel, dampening investor confidence and increasing demand for the dollar as a safe-haven currency.
The situation intensified after Iran seized two vessels in the strategically vital Strait of Hormuz, raising fears of prolonged disruptions to global energy supplies. The move came shortly after U.S. President Donald Trump extended an indefinite ceasefire with Iran, though there has been no meaningful progress toward restarting formal peace talks.
Key issues—including ceasefire terms, maritime blockades, nuclear concerns, and control of the Strait of Hormuz—remain unresolved, leaving the waterway effectively constrained. This has triggered a significant energy shock, with ripple effects hitting economies worldwide through rising fuel costs and heightened uncertainty.
Currency markets have responded cautiously. Analysts say investors are increasingly reluctant to make aggressive bets following a brief rally earlier this month that was fueled by hopes of de-escalation. That optimism has since faded, giving way to a more cautious, wait-and-see approach as geopolitical risks remain elevated.
The euro weakened to $1.1699 after earlier falling to its lowest level since mid-April, putting it on track for a weekly decline of about 0.5%—its first drop in four weeks. Similarly, the British pound slipped 0.1% to $1.3484, reflecting broader pressure on major currencies against the strengthening dollar.
Commodity-linked currencies also lost ground. The Australian dollar fell 0.2% to $0.7147, while the New Zealand dollar dropped 0.3% to $0.5886, as rising oil prices and global uncertainty weighed on risk-sensitive assets.
Meanwhile, the Japanese yen remained relatively stable at 159.56 per dollar, lingering near the psychologically important 160 level, which is widely viewed as a potential trigger point for government intervention. The Bank of Japan is expected to maintain its current interest rate policy at its upcoming meeting, though it may signal readiness to raise rates as early as June.
The U.S. dollar index, which tracks the greenback against a basket of six major currencies, ticked up to 98.676—close to its highest level since April 13. The index is on course for a modest weekly gain of around 0.5%, recovering after two consecutive weeks of declines.
Earlier in the conflict, the dollar benefited from strong safe-haven demand as the war broke out, but those gains were partially reversed when optimism around a potential peace deal sparked a temporary rally in riskier assets. Now, with tensions persisting and oil prices climbing again, the dollar is regaining strength.
The nearly two-month-long conflict in the Middle East has driven fuel prices sharply higher, contributing to a drop in global consumer confidence and complicating central banks’ efforts to manage inflation. Rising energy costs have also dampened expectations for interest rate cuts this year.
According to a recent survey of economists, the Federal Reserve is likely to delay any rate cuts for at least six months, as inflationary pressures fueled by the energy crisis remain a concern.
Investors are now closely watching upcoming U.S. economic data, including weekly jobless claims and Purchasing Managers’ Index (PMI) reports. These indicators will offer further insight into whether the surge in energy prices is beginning to weigh more heavily on the broader economy.
With geopolitical tensions unresolved and economic uncertainty rising, financial markets are expected to remain volatile in the near term, with the dollar continuing to draw support from its status as a global safe haven.