Dollar Gains Amid Escalating Middle East Tensions

Global Markets Eye Iran Conflict as Investors Weigh Hopes for De-Escalation

The US dollar erased early losses to trade with a firm tone against most major currencies on Thursday, as investors weighed hopes for a de-escalation in the Iran war. According to sources and officials, the United States and Iran are edging toward a limited and temporary agreement to halt their war, with a draft framework that would stop the fighting but leave the most contentious issues unresolved.

The hopes of a deal between the two countries have buoyed global stock and bond markets since Wednesday, though sentiment took a knock on Thursday after the Wall Street Journal reported that Iran would not accept what it called an "unrealistic" American plan to reopen the Strait of Hormuz. Approximately one-fifth of the world's oil and liquefied natural gas ordinarily passes through the Strait of Hormuz.

Market sentiment was mixed, with the euro remaining flat on the day at $1.1748 after gaining 0.47% on Wednesday. The pound sterling was 0.1% lower at $1.35785 after rallying 0.4% the previous day.

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Market Sentiment Comparison

The oil prices swung between gains and losses in volatile trading on Thursday, ultimately settling lower after a report said the United States was considering restarting operations to escort commercial ships through the Strait of Hormuz as early as this week.

Oil Prices Comparison

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Analysts remain cautious about the yen's outlook, with Japan's top currency diplomat, Atsushi Mimura, stating that the country was not restricted on intervention. The Japanese yen eased about 0.3% against the dollar a day after having appreciated sharply with speculation that Japanese authorities had again intervened in markets to buy their currency.

Yen Movement

Repeated interventions raise the likelihood of broader policy action in the June to July window, consistent with the late 2024 playbook, according to analysts. The risk-sensitive Australian dollar eased 0.2% and last fetched $0.7222, just below the four-year high it touched on Wednesday.

Riskier Currencies Comparison

Leading cryptocurrency bitcoin slipped about 2% to $80,017, but remained not far from the more than three-month high touched in the previous session.