Dollar Strengthens Amid Oil Price Surge and Inflation Fears

The U.S. dollar extended its winning streak Thursday, hovering near its highest levels of the year as skyrocketing crude oil prices intensified inflation concerns and prompted traders to anticipate more aggressive central bank tightening worldwide.

For a third consecutive session, the greenback gained ground against major currencies including the euro, Japanese yen, British pound, and New Zealand dollar. The rally was fueled largely by surging oil prices, which economists warn will drive up energy costs and drag on global economic growth — particularly the longer Middle East tensions persist.

Analysts noted that currency movements have closely mirrored each country's dependence on imported energy. Europe, highly exposed to energy price shocks, saw the euro slip 0.2% to $1.1540, nearing its lowest point since November. Meanwhile, the yen briefly weakened past 159 per dollar, approaching its softest level since mid-2024. The Australian dollar fell 0.4% and the British pound dipped 0.3%, both hovering near year-to-date lows.

Oil market volatility has intensified following Iran's military strikes on merchant vessels, which reduced traffic through the Strait of Hormuz to a trickle. Brent crude futures spiked more than 10% at one point, topping $101 per barrel. Despite the International Energy Agency authorizing a record release of 400 million barrels from strategic reserves, Brent crude remained nearly 8% higher in Asian afternoon trading.

Broader market sentiment deteriorated further after the Trump administration launched a fresh trade investigation targeting excess industrial capacity across 16 countries, adding renewed tariff pressure following a recent Supreme Court ruling.

Markets are now pricing in faster monetary tightening globally. The European Central Bank is expected to hike rates as early as June, and the Federal Reserve is seen holding off on any cuts until at least September, with futures markets showing reduced expectations for near-term easing.

Bitcoin and Ethereum also declined, falling 1.7% and 2.0% respectively, reflecting weakened risk appetite across financial markets.