The dollar rose 0.8% to $1.1525 against the euro, its highest since November, and rose nearly 0.4% to 158.48 yen at the start of the Asian session.
Sterling and the Australian and New Zealand dollars fell more than 0.6% against the dollar, while Brent and US crude futures fell to $108 a barrel, which is expensive enough to dampen global growth.
“Oil remains a transmission channel for inflation expectations, prices and currency markets, with a dollar revival echoing the energy crisis of 2022,” said Bob Savage, head of markets macro strategy at BNY.
“Next week will test whether markets continue to treat the current conflict as an existential shock or begin to price in a more sustained supply disruption.”
The dollar, which posted its fastest one-week gain in 15 months at the start of last week’s war, has been the most effective safe-haven for investors as gold has fallen amid a broad sell-off that has made sharp gains in recent weeks.
“The dollar is benefiting from its dual status as a safe haven and an energy exporter,” said Joe Caporso, head of foreign exchange, international and geoeconomics at the Commonwealth Bank in Sydney. “We expect the Iran-US war to escalate before it subsides. Iran is encouraged to gain leverage in future negotiations to end the conflict. The US and Israel are encouraged to reduce Iran’s offensive capabilities.”
The Australian dollar fell 0.7% to $0.6983 and the New Zealand dollar fell 0.6% to $0.5860. Sterling fell nearly 0.8% to $1.3324, while the dollar even gained 0.5% against its fellow safe haven in the Swiss franc.
Iran named its supreme leader on Monday, signaling hard-liners firmly in power in Tehran a week into a war with the US and Israel.
The conflict has already disrupted around a fifth of the world’s crude and natural gas supplies, as Tehran targets ships in the vital Strait of Hormuz between its coast and Oman and attacks energy infrastructure across the region.
Qatar’s energy minister told the Financial Times on Friday that he expects all Gulf energy producers to stop exporting within weeks, a move he said could push oil prices to $150 a barrel.
Higher energy prices act like a tax and can stoke inflation, leaving investors worried that central bankers may be reluctant to cut interest rates.
A surprisingly weak US jobs data halted the dollar’s gains briefly on Friday, and raised expectations of a US rate cut, but it eased slightly on Monday morning and US stock futures were also lower, with the S&P 500 futures down 1.6%.
