U.S. Dollar Climbs as Trump Escalates Rhetoric Against Iran

The U.S. dollar strengthened Thursday, drawing support from its safe-haven status after President Donald Trump signaled a significant escalation in military operations against Iran. The U.S. Dollar Index climbed 0.4% to 100.03 as investors reacted to the president's aggressive remarks delivered late Wednesday.

Earlier in the week, markets had shifted toward riskier assets amid hopes of a de-escalation between Washington and Tehran. That optimism reversed sharply when Trump announced plans to intensify operations over the coming weeks, stating that Iran's naval and missile capabilities had been substantially weakened and that the U.S. was close to achieving its strategic goals. He also offered no concrete timeline for reopening the Strait of Hormuz — a vital global energy corridor through which roughly one-fifth of the world's oil and gas supply passes.

Currency strategists at ING noted that while the first phase of a de-escalation trade had played out in foreign exchange markets, a further dollar decline would require clearer guidance on the Strait of Hormuz situation, which now appears increasingly uncertain. Sentiment received a modest lift after Iran's state media reported the country was working with Oman to develop a vessel monitoring protocol for the strait, though Iran's plan to impose tolls on passing ships drew immediate pushback from the U.S.

Attention now shifts to Friday's nonfarm payrolls report for March, which investors will closely watch for signals on Federal Reserve monetary policy. Weekly jobless claims came in below forecasts, though job cut announcements and a softening JOLTS report pointed to uneven labor market conditions.

Among other major currencies, the euro dipped briefly before recovering, while sterling fell as much as 0.6%, partly reflecting the U.K.'s vulnerability to energy supply disruptions and rising inflation expectations. The Japanese yen held steady, and the Australian dollar recovered after trade surplus data beat expectations.