The U.S. dollar logged sharp gains on Tuesday, hitting multi-month peaks against the euro, sterling and yen as tensions in the Middle East fuelled expectations of prolonged global inflation and triggered broad demand for safe‑haven assets.
But as U.S. equities cut their losses in the afternoon session, the dollar pared its gains.
A jump in crude prices overall has pushed traders to re‑evaluate the likelihood and timing of interest rate cuts by major central banks. Higher energy costs threaten to elevate consumer prices, particularly for economies heavily dependent on oil imports, making policymakers more cautious about easing financial conditions too soon.
On day four of the war, Israeli and U.S. forces pounded targets across Iran on Tuesday, prompting Iranian retaliatory strikes around the Gulf as the conflict spread to Lebanon.
In that context, the United States is increasingly viewed as a relative safe haven, supported by its higher degree of energy self‑sufficiency and generally resilient economic data, some analysts said.
