The dollar is on track for its best weekly performance since late 2024, climbing as global investors seek safety amid Middle East tensions. The Bloomberg Dollar Spot Index has gained 1.4% this week as crude oil prices jumped roughly 25% following US and Israeli strikes on Iran and subsequent Iranian counterattacks.

Traders are scaling back expectations for Federal Reserve interest rate cuts as the conflict drives inflation concerns. Higher energy costs are disrupting crude production and shipping, forcing central banks to reconsider monetary policy. The market has largely shrugged off disappointing US jobs data showing a 92,000 drop in nonfarm payrolls last month, the largest decline since the pandemic.

The Canadian dollar has weathered the storm relatively well thanks to its energy exposure, while the euro has fallen about 2% as Europe faces higher oil and natural gas prices. Treasury yields have climbed for five consecutive days as investors weigh the inflationary impact of sustained high energy costs.