Dollar near 10 month high on Middle East escalation concerns

The dollar was near a 10 month high on Monday and heading for its biggest monthly gain since last July as mixed signals from Iran and the United States dimmed hopes of a possible quick end to the Middle East conflict.

US President Donald Trump said that Iran’s new leaders have been “very reasonable”, as more US troops arrived in the region and Tehran warned it will not accept humiliation.

The yen hovered near the key 160 per dollar level, after hitting its weakest since July 2024 when Tokyo last intervened to shore up the currency, while the euro found some support from expectations of European Central Bank rate hikes.

Markets have been rattled this month after the Iran conflict effectively shut the Strait of Hormuz, a chokepoint for about a fifth of global oil and gas flows, driving Brent ?crude toward a record monthly rise.

The dollar has benefited from its safe haven status since early March, with higher oil prices hurting Japan and the euro zone but insulating the United States as a net crude exporter.

The US dollar index was roughly unchanged at 100.19. It hit 100.54 in mid-March, its highest level since May 2025, and was on track for its biggest monthly rise since July 2025.

Barclays said dollar sentiment was approaching “max bullish” levels on its index, according to traditional gauges including growth proxies, rate differentials and beta indicators.

“The playbook is to sell rallies in risk and maintain volatility hedges,” said Chris Weston, head of research at Pepperstone.

Markets will closely watch US jobs data later in the week, which could affect expectations for the Federal Reserve policy path.

“In the eye of the storm, this week delivers a crucial run of US labour market data,” said Bob Savage, ?head of markets macro strategy at BNY.

“Given the weak February jobs report and a month of conflict in the Middle East, we’re keen to learn how the jobs situation has responded,” he added.