NEW YORK -- The U.S. dollar saw broad gains Monday, propelled by a surge in oil prices. The conflict involving the U.S. and Iran is fueling fears of disrupted global energy supplies, prompting a flight to the perceived safety of the greenback. Investors are concerned that a prolonged conflict could significantly impact economic growth.
The euro dipped against the dollar, while the dollar reached a six-week peak against the Japanese yen. Sterling also weakened versus the U.S. currency.
"The U.S. dollar always plays well as a safe haven in a world of chaos," stated Juan Perez, director of trading at Monex USA. He added that the dollar often strengthens when the United States demonstrates military capability.
Global stock markets, bonds, and precious metals declined as investors grappled with the potential inflationary impact of rising oil prices on economic growth.
Oil prices trimmed some of their earlier sharp gains after reports indicated G7 finance ministers would discuss a coordinated release of oil from emergency reserves. Brent crude saw a significant price increase.
However, Monex's Perez cautioned that the dollar's current strength might not be sustainable, warning it could face pressure if the conflict is resolved quickly. He noted that the current economic climate in the U.S. is already uncertain, and any swift resolution would significantly impact the dollar.
Surprisingly weak U.S. jobs data released Friday had previously tempered dollar gains and raised expectations for potential U.S. rate cuts, though this sentiment had largely faded by Monday.
In other markets, the Canadian dollar held steady against the greenback, supported by rising oil prices. Canada, a major oil exporter, benefits from higher crude prices.
Analysts suggest Asia could be disproportionately affected by the energy price shock due to its high reliance on Middle Eastern oil and gas. The Eurozone and Britain are also considered heavily exposed.
The cryptocurrency bitcoin saw a modest rise but remained near recent lows.
"The real question is how high and how long prices stay elevated, because that's what will ultimately determine the economic fallout," commented Deepali Bhargava, regional head of research for Asia-Pacific at ING. "A prolonged conflict, coupled with continued currency weakness, would feed more directly into inflation pressures across the region."