Dollar Surges as Oil Hits $110 Amid Middle East war

The U.S. dollar rose to a three-month high versus the euro on Monday as oil prices surged past $110 a barrel. Global stocks slid amid fears of a prolonged Middle East war affecting energy supplies. The euro fell to $1.1518, its lowest level since November.

Risk-sensitive currencies, including the British pound, Australian, and New Zealand dollars, dropped roughly 1% against the greenback. Meanwhile, Brent and U.S. crude futures jumped more than 20% at their peak. Investors reacted to potential energy supply disruptions and higher inflation expectations.

Bob Savage, head of macro strategy at BNY, said oil remains a key driver of inflation, interest rates, and currency markets. He added that the current week will test whether the market treats the conflict as a short-term shock or a long-lasting disruption.

The dollar had already posted its sharpest one-week rise in 15 months after the war broke out last week. Gold struggled as investors sold assets that had gained recently. Experts noted that the dollar’s dual status as a safe haven and energy-linked currency supports its strength.

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Joe Capurso, Head of Foreign Exchange at Commonwealth Bank in Sydney, said the Iran-U.S. conflict may escalate before easing. He explained that Iran aims to gain leverage while the U.S. and Israel seek to degrade Iran’s offensive capabilities.

The dollar also gained against other safe havens, rising 0.8% versus the Swiss franc. It increased nearly 0.5% to 158.63 yen and 1.2% to 1,498.30 won. Analysts warned that Asia could face the brunt of rising oil prices, leaving few safe options for investors.

The war has already disrupted around 20% of global crude and natural gas supply. Iran has targeted ships in the Strait of Hormuz and attacked energy infrastructure in the region. Qatar’s energy minister warned exports may fully stop, potentially pushing oil to $150 per barrel. High energy prices could stoke inflation, complicating central bankers’ rate decisions and weighing on global markets.