Dollar Surges Amid Middle East Tensions and Market Uncertainty

The U.S. dollar is experiencing its most significant weekly surge in over a month, fueled by ongoing tensions in the Middle East and potential ripple effects on the global economy. The conflict, primarily between Israel and Iran, shows no signs of abating, prompting market participants to turn to traditional safe havens.

The dollar index, tracking the U.S. currency against six major counterparts, is likely to rise by 0.45% this week. The escalation in the Middle East, with Israel looking to counter Iran's nuclear aspirations, keeps investors on edge, especially regarding potential U.S. military involvement.

Oil prices, which recently peaked, have slightly eased, adding to inflation concerns that central banks are closely monitoring. The situation poses challenges for monetary authorities in deciding whether to ease policies to support growth or hold firm to prevent inflation. Additionally, currency shifts are influenced by geopolitical developments and central banks' responses worldwide.

(With inputs from agencies.)