THE U.S. dollar rose against most major currencies on Monday as escalating military tensions in the Middle East fuelled a sharp rebound in oil prices, raising concerns that higher energy costs could prolong inflation and delay the global monetary easing cycle.
The dollar gained 0.1 per cent against the Japanese yen to ¥161.92, while the euro slipped 0.1 per cent to US$1.1403 and the British pound eased 0.1 per cent to US$1.3383, according to Reuters.
Commodity-linked currencies also weakened, with the Australian dollar falling 0.1 per cent to US$0.6942 and the New Zealand dollar declining 0.1 per cent to US$0.5757.
The move followed renewed missile and drone exchanges between the United States and Iran over the weekend, during which Tehran targeted U.S. facilities across several Gulf states and announced the closure of the Strait of Hormuz, heightening fears of disruptions to global energy supplies.
The geopolitical escalation lifted oil prices, with Brent crude futures rising 3.3 per cent to US$78.49 a barrel during Asian trading, reinforcing concerns that higher fuel costs could reignite inflationary pressures worldwide.
"After the flare-up into the end of last week which continued over the weekend, the dollar has responded, and the crude oil price has been the driver," said Tony Sycamore, market analyst at IG in Sydney.
"This reinflames concerns that if the energy prices rise from here, we could start to see rate hikes pulled forward."
Investors subsequently increased expectations that the U.S. Federal Reserve could tighten monetary policy further before the end of the year.
According to CME Group's FedWatch Tool, futures markets are now pricing a 52.1 per cent probability of at least two Federal Reserve interest rate increases by December, up from 47.6 per cent at the end of last week.
The U.S. Dollar Index, which tracks the greenback against a basket of six major currencies, held firm at 101.07 after touching its highest level since 8 July.
Market attention is now focused on a series of key U.S. economic releases this week, including consumer price index (CPI) data on Tuesday, producer price index (PPI) figures on Wednesday, and testimony by Federal Reserve Chairman Kevin Warsh before the U.S. House of Representatives and Senate.
The data are expected to provide investors with fresh clues on the outlook for U.S. interest rates as policymakers weigh persistent inflation risks against slowing global growth.
Meanwhile, sources familiar with the Bank of Japan's policy discussions said the central bank is expected to raise its fiscal 2026 economic growth forecast while maintaining vigilance over upside inflation risks driven by the weak yen and sustained demand linked to artificial intelligence investment.
In cryptocurrency markets, Bitcoin fell 0.6 per cent to US$63,770.42, while Ether declined 1.1 per cent to US$1,801.28. - July 13, 2026
