U.S. Dollar Posts Strong Monthly Gain Amid Middle East Conflict Despite Late Dip

The U.S. dollar slipped slightly on Tuesday but remained on track for its biggest monthly gain since July 2025, driven by its safe-haven appeal during the ongoing U.S.-Israel war on Iran. The conflict, now stretching beyond a month, has sent oil prices sharply higher, raising global inflation concerns and threatening economic growth worldwide.

The U.S. Dollar Index fell 0.6% to 99.96 by late afternoon trading, yet the greenback was still positioned for a 2.4% advance in March. The pullback came as investors shifted toward riskier equities following reports that President Trump was open to ending military operations against Iran, even if the critical Strait of Hormuz remained closed. Iran's leadership also signaled willingness to negotiate a ceasefire given appropriate security guarantees.

Soaring oil prices, triggered by the Strait of Hormuz closure and resulting supply disruptions, have forced investors to rethink interest rate cut expectations globally. Higher-for-longer rate scenarios typically support a stronger dollar, which has also benefited from the United States' position as a net energy exporter. Federal Reserve Chair Jerome Powell acknowledged near-term inflation pressures but suggested the central bank would look beyond the oil supply shock, comments analysts characterized as relatively dovish compared to other global central banks. Several institutions, including those in Australia, Japan, the Eurozone, and the United Kingdom, are expected to raise benchmark rates amid the energy-driven inflation surge.

On the economic data front, U.S. consumer confidence edged up to 91.8 in March, topping forecasts, though inflation expectations among respondents hit their highest level since August 2025. The latest JOLTS report revealed 6.88 million job openings in February, slightly below estimates, with the hiring rate falling to its lowest point since April 2020. Meanwhile, Eurozone annual inflation climbed to an estimated 2.5% in March, up from 1.9% in February, with energy costs surging nearly 5%.