US Dollar Index remains generally strong above 100.00 as concerns over escalating Iran tensions persist

US Dollar Index Holds Near Two-Week Peak Amid Middle East Tensions

During Monday's Asian session, the US Dollar Index (DXY)—which measures the dollar’s strength against a basket of six major currencies—edged slightly lower to around 100.15 after pulling back from an earlier high of 100.35. Despite this minor dip, the index remains close to its highest level in two weeks.

The US Dollar began the day on a stronger note, fueled by growing concerns over escalating conflict in the Middle East following reports of a potential US ground invasion of Iran. Rising geopolitical risks have increased demand for safe-haven assets like the dollar.

Last Thursday, the Wall Street Journal reported that the US Department of Defense is weighing the deployment of an additional 10,000 troops to Iran for possible ground operations. In response, Iran’s Parliament speaker Mohammad Bagher Ghalibaf warned, as reported by the BBC, that Iran would retaliate forcefully against any US military incursion.

A US ground offensive could further intensify the ongoing conflict in the Middle East, potentially disrupting energy supplies and driving oil prices higher. At present, WTI crude oil has surged by nearly 2.5%, trading above $102 per barrel.

Persistently elevated oil prices are prompting traders to anticipate tighter monetary policy from the Federal Reserve this year. The Fed’s hawkish outlook has been reinforced as rising oil costs have led to higher gasoline prices in the US.

Data from the CME FedWatch tool indicates that market participants have largely dismissed the possibility of a rate cut, now assigning a 24.6% probability to at least one rate hike by year-end—a significant shift from earlier expectations of two cuts before the conflict escalated.

In related news, President Donald Trump told the Financial Times that he is optimistic about reaching a swift agreement with Iran.

Looking ahead, the US economic calendar is busy this week, highlighted by the release of March’s Nonfarm Payrolls (NFP) data on Friday.