Dollar Soars, Hormuz Drives Oil Higher
The US dollar strengthened sharply after tensions between the United States and Iran in the Strait of Hormuz re-escalated. The US Dollar Index (DXY) rose around 0.3% to 101.30, driven by safe-haven demand and a surge in oil prices.
US President Donald Trump said the Strait of Hormuz would remain open "with or without Iran." He also called the United States the "Guardian of the Strait of Hormuz" and announced a blockade of Iranian ships and customers. This statement immediately heightened market concerns about the risk of disruption to global energy supplies.
Iran rejected Washington's involvement in managing the Strait of Hormuz. Tehran warned that any unauthorized US transit would be met with strong resistance. Iran also called cooperation between regional countries and the US an act of war.
In the foreign exchange market, a strengthening dollar pressured most major currencies. EUR/USD fell towards 1.1380, while GBP/USD weakened to around 1.3350. USD/JPY rose to near 162.40 as the yen remained under pressure despite the market's risk-off mode. Meanwhile, AUD/USD fell below 0.6920 as appetite for riskier assets weakened.
Oil prices also surged sharply. WTI rose around 9% to near US$78 per barrel, hitting a one-month high. This surge occurred due to market concerns that disruptions in the Strait of Hormuz could tighten global energy supplies.
Meanwhile, gold fell below the psychological level of US$4,000, weakening by around 3%. Gold failed to find support from geopolitical tensions, as a strong dollar and concerns about prolonged high interest rates dampened demand for non-yielding assets.
The market's next focus is on US inflation data, or CPI. Headline inflation is expected to fall to 3.8% annually from 4.2%, while core CPI is projected to remain at 2.9%. Investors are also awaiting testimony from Fed Chair Kevin Warsh and comments from several Fed officials to gauge the future direction of interest rates.
As for the market impact, the dollar still has the potential to strengthen as long as tensions in Hormuz remain unabated. If oil prices continue to rise and inflation becomes a threat again, the Fed could maintain its hawkish stance. This could put pressure on gold, stocks, crypto, and riskier currencies, while the energy sector is likely to remain supported.
Source: Newsmaker.id
