Geopolitical Tensions Flare: Dollar and Oil Markets React to Middle East Conflict

The U.S. dollar strengthened on Monday as investors, wary of rising geopolitical tensions, sought a safe haven amidst the ongoing conflict in the Middle East. The financial markets maintained a cautious stance, anticipating Iran's response to the recent U.S. military actions targeting its nuclear facilities.

In the oil sector, prices experienced a surge to a five-month high before settling lower by day's end. The dollar showed a 1% rise against the yen, marking its highest point since mid-May. Bank of America analysts suggested the dollar-yen exchange rate could increase if elevated oil prices persist, given Japan's heavy reliance on Middle Eastern petroleum imports.

The Euro's decline was relatively minor, and the British pound remained steady despite slight improvements in UK PMIs. Meanwhile, Iran's parliamentary approval to potentially close the Strait of Hormuz, a vital oil shipping route, underscores the ongoing geopolitical strain that continues to influence currency markets and investor behavior.

(With inputs from agencies.)