The US dollar surged over 0.7% to its highest level since early February amid escalating geopolitical tensions and soaring oil prices. Crude prices jumped following US-Israeli strikes on Iran, prompting swaps traders to reduce expectations for Federal Reserve rate cuts to 59 basis points this year from 61 basis points just days prior. Market analysts suggest sustained oil-driven inflation could force the Fed to adopt a more hawkish stance, diminishing bets on near-term monetary easing.

Geopolitical uncertainty intensified as Iran’s national security chief declared no negotiations with the US, while President Trump vowed continued bombing campaigns until achieving strategic goals. Risk aversion spread across markets, with S&P 500 futures plunging 1.5% on Monday. Safe-haven assets saw mixed reactions: gold rose modestly, while Treasuries, the yen, and Swiss franc all retreated against the dollar’s renewed strength.

The dollar’s rally reflects dual pressures—energy market volatility and simmering Middle East conflict—that challenge policymakers’ ability to deliver rate cuts without triggering inflationary spillovers. Analysts warn that prolonged oil price shocks could derail the Fed’s easing trajectory, forcing a recalibration of monetary policy timelines.

With gold underperforming amid dollar resilience, investors are reassessing traditional safe-haven allocations. The divergence highlights growing confidence in the US currency’s role as a stabilizer during turbulent periods, even as central banks grapple with conflicting inflation and growth signals.