Dollar Gains on Safe-Haven Demand as Iran Tensions and Inflation Data Loom

The U.S. dollar strengthened slightly on Monday as investors turned to safe-haven assets following rising tensions between Washington and Tehran. Market sentiment remained cautious ahead of key U.S. inflation reports expected later this week, with traders closely monitoring the impact of surging oil prices on the economy.

The U.S. Dollar Index, which measures the greenback against six major currencies, climbed 0.1% to 97.96 during late trading. The move came after President Donald Trump rejected Iran’s latest proposal aimed at ending the ongoing conflict between the two countries.

Iran reportedly requested recognition of its sovereignty over the Strait of Hormuz, an end to hostilities, and compensation for war-related damages. Trump dismissed the proposal as “totally unacceptable,” criticizing Tehran for failing to address its nuclear program. He also described the current ceasefire as “unbelievably weak,” adding further uncertainty to global markets.

The Strait of Hormuz, a critical route for global oil shipments, remains a major point of conflict. Supply disruptions have pushed crude oil prices sharply higher, fueling concerns about inflation worldwide. Analysts believe elevated oil prices could continue supporting the U.S. dollar because the American economy is seen as more resilient than many others during energy shocks.

Investors are now focused on upcoming U.S. Consumer Price Index (CPI) and Producer Price Index (PPI) reports. Economists expect energy costs to remain a major driver of inflation, while markets will also look for signs that higher fuel prices are spreading into core inflation categories. Stronger inflation data could reinforce expectations that the Federal Reserve may maintain higher interest rates for longer, which would likely support the dollar further.

Elsewhere, the Chinese yuan edged higher after stronger-than-expected inflation data from China, while the British pound and euro both slipped against the dollar amid political and economic uncertainty.