The U.S. dollar remained near an 11-month high on Tuesday as investors held cautious positions ahead of a U.S.-imposed deadline for Iran to reopen the Strait of Hormuz or face potential attacks on its infrastructure.
Ongoing conflict in the Middle East and the continued closure of the key النفط shipping route have driven global energy prices sharply higher. This has boosted demand for the dollar, widely viewed as a safe-haven asset during periods of geopolitical uncertainty.
Iran has shown no indication of complying with U.S. President Donald Trump’s demand to reopen the strategic waterway before the 8 p.m. Eastern Time (0000 GMT) deadline, keeping tensions elevated.
Market analysts say uncertainty around the situation is supporting the greenback. Chris Turner, head of forex research at ING, noted that without clear signs of a ceasefire or a delay in the deadline, the dollar is likely to remain strong.
Brent crude prices hovered around $110 per barrel as Iran rejected a U.S. ceasefire proposal, reinforcing concerns over supply disruptions. Analysts at Commerzbank warned that Iran appears determined to leverage its control over the Strait of Hormuz for long-term strategic gains.
The U.S. dollar index stood at 100.00, close to last week’s peak of 100.64, its highest level since May 2025. Meanwhile, the Japanese yen weakened to 159.80 per dollar, nearing levels that previously triggered government intervention.
Investors are also closely monitoring upcoming U.S. economic data for signals on the Federal Reserve’s policy direction. Strong data could reinforce expectations of further interest rate hikes, particularly if rising energy prices continue to fuel inflation.
Key indicators this week include durable goods orders, consumer sentiment data, and February’s PCE inflation report. Additionally, minutes from the Federal Open Market Committee (FOMC) March meeting are expected to provide further insight into the central bank’s outlook.
In Europe, the euro held steady at $1.1550 as markets priced in the possibility of multiple interest rate hikes by the European Central Bank before the end of the year. Policymakers signaled readiness to act swiftly if inflationary pressures persist, with some not ruling out a rate increase as early as April.
Meanwhile, the Australian and New Zealand dollars recovered slightly from recent lows but remained under pressure amid ongoing geopolitical tensions and volatility in global energy markets.