The US Dollar (USD) ended the week on a firmer note as the US/Israeli conflict with Iran entered its second week, with Iran's closure of the Strait of Hormuz causing a spike in Oil prices and heightening inflation risks. This escalation has prompted investors to seek safe-haven currencies, notably the Greenback, as market sentiment remains dominated by the ongoing Middle East conflict. Iran targeted oil tankers near the Strait of Hormuz this week, disrupting supply in one of the world’s most critical energy corridors [1].
The US Dollar Index (DXY) crossed the 100.00 mark and is now trading near 100.30 after four consecutive days of gains [1]. The Federal Reserve (Fed) left its policy rate unchanged at 3.50%-3.75% in January and appears to be in a wait-and-see stance ahead of its next interest rate decision scheduled for Wednesday [1].
On the currency markets, the US Dollar was the strongest against the New Zealand Dollar, with a 1.12% gain, and also posted notable gains against the Australian Dollar (1.12%), British Pound (0.80%), Euro (0.72%), Canadian Dollar (0.65%), and Swiss Franc (0.61%) [1]. EUR/USD is trading near the 1.1430 price region, slipping to levels last seen in August 2025, while GBP/USD is trading close to 1.3240, reaching levels last seen in December 2025. The surge in Oil prices poses a challenge for the Eurozone economy, which is heavily dependent on imported fuel [1].
USD/JPY is trading near 159.60 with little gains throughout the day, as periods of heightened global uncertainty tend to benefit the Japanese Yen (JPY). The article notes that should the conflict escalate or threaten global energy supplies, further market volatility is expected [1].
CONCLUSION
Iran's closure of the Strait of Hormuz has significantly impacted global markets, driving Oil prices higher and strengthening the US Dollar as investors seek safe havens. The ongoing conflict and supply disruptions are fueling inflation concerns and weighing on energy-dependent economies, particularly in the Eurozone and UK. Market participants remain cautious, awaiting further developments and the upcoming Federal Reserve decision.