The dollar index held near 99.325. The euro traded at $1.1621 and sterling at $1.3320, with neither gaining on the greenback.
Brent crude climbed over 1% to above $110 per barrel as Middle East tensions intensified, raising concerns about disruptions to shipping through the Strait of Hormuz-a waterway that handles about a fifth of the world's daily oil supply.
On the bond side, US Treasury yields pushed higher as prices fell. The 10-year yield rose to about 4.631%, while the 2-year yield hit approximately 4.102%.
According to CME FedWatch data, there is now over a 50% probability of a Fed rate hike by December, as rising energy costs and sticky inflation change the narrative that the tightening cycle was over.
Barclays analysts noted that conditions for both risk assets and bonds are deteriorating simultaneously, describing the setup as favorable for continued dollar strength.
What makes the current moment unusual is that the safe-haven bid for the dollar is coinciding with a selloff in Treasuries. Normally, the two move together. But markets are now buying dollars while selling bonds, suggesting the inflation narrative is powerful enough to override the typical flight-to-safety playbook for fixed income.
The 10-year yield at 4.631% has caused stress in previous cycles. Given the Barclays assessment, the conditions for both risk assets and bonds deteriorating simultaneously is a key concern.