The dollar approached a 10-month high Monday, positioning for its largest monthly gain since July 2025 as Middle East tensions escalated. Mixed signals from Iran and the United States dampened hopes for a swift conflict resolution.
President Trump described Iran's leadership as "very reasonable" while additional US troops deployed to the region. Tehran warned against accepting humiliation.
Oil markets reacted after Iran effectively closed the Strait of Hormuz, affecting one-fifth of global oil and gas flows. Brent crude surged toward record monthly gains.
The dollar index held steady at 100.19, down from its March peak of 100.54 - the highest since May 2025. Higher oil prices hurt Japan and the eurozone while benefiting the US as a crude exporter.
Barclays noted dollar sentiment approaching "max bullish" levels based on growth proxies, rate differentials, and beta indicators.
The euro traded around $1.15, heading for a 2.5% March decline - its worst monthly performance since July. Market expectations shifted toward ECB rate hikes instead of cuts.
The yen strengthened slightly to 159.65 per dollar after touching 160.47, its weakest point since July 2024. Japan prepared for potential intervention as the currency dropped over 2% in March.