Dollar Strengthens, Oil Breaks $100, Boosting Inflation Expectations
The dollar index surged to around 99.5 on Monday, March 9, nearing its highest level in more than three months. The rally occurred as oil prices surpassed $100 per barrel, amid concerns that the prolonged Middle East conflict could trigger longer-term disruptions to global energy supplies.
Rising energy prices have prompted markets to reassess the direction of inflation. Investors have revised inflation expectations since the outbreak of hostilities last week, which in turn has strengthened bets that the Federal Reserve could delay its planned interest rate cuts.
The underlying message is clear: more expensive oil increases the risk of persistently high inflation, narrowing the scope for monetary policy easing. With the prospect of US interest rates remaining higher for longer, the dollar's yield appeal strengthens, supporting the dollar index.
Beyond interest rates, the dollar is also being boosted by a flight to safety trend as the Iran war enters its second week with no sign of resolution. In political developments, President Donald Trump is reportedly demanding Tehran's unconditional surrender, adding to the geopolitical uncertainty underlying market movements.
On the other hand, Iran reportedly appointed Mojtab Khamenei to replace his father as Supreme Leader, a sign that hardliners remain in control. This combination of escalating conflict and signals of political continuity reinforces perceived risks to energy supply stability and global sentiment.
Over the past week, the dollar has reportedly outperformed gold and other safe-haven assets, re-entering market focus. Going forward, market focus will be on the direction of oil prices, developments in the Middle East conflict, and changes in expectations for the Fed's interest rate, which could potentially determine the dollar's continued trend. (asd)
Source: Newsmaker.id
