The US Dollar climbed against major currencies on Tuesday as stalled negotiations to end the Middle East conflict drove concerns in financial markets. Rising oil prices added to fears that central banks may have to keep interest rates elevated for longer to contain inflation.
Investors are increasingly worried that the ceasefire in effect since 7th April may collapse, potentially leading to renewed fighting in the conflict that erupted in late February, causing thousands of deaths and disrupting key energy supplies.
As the strategically important Strait of Hormuz remained mostly shut, Brent crude futures rose 0.6% to $104.88 per barrel, while US West Texas Intermediate crude gained 0.89% to reach $98.93 a barrel, Reuters reports.
US President Donald Trump said the ceasefire with Iran was “on life support,” as recent exchanges over a potential peace agreement highlighted major disagreements still separating both sides on several key issues.
Currency markets adopted a risk-off tone, with investors turning their attention to President Donald Trump’s upcoming visit to China later this week and the closely watched US inflation data set for release later in the day.
US Treasury Secretary Scott Bessent is also travelling through Asia for meetings in Japan and South Korea.
In addition, the Euro slipped 0.24% to $1.1754, while the British Pound fell 0.26% to $1.3575. Meanwhile, the Dollar index, which tracks the US currency against a basket of six major peers, climbed 0.2% to 98.17.
The greenback initially gained support from safe-haven demand after the conflict erupted, but it has since surrendered much of those advances and continues to trade erratically as uncertainty surrounds the prospects for a peace agreement and a fragile ceasefire that appears close to collapsing.
Attention is now turning to the upcoming US inflation report, which economists surveyed by Reuters news agency expect to show consumer prices increased 0.6% last month, following a sharp 0.9% rise in March. Forecasts varied widely, ranging from a 0.4% increase to as much as 0.9%.
The figures are expected to strengthen expectations that the Federal Reserve will leave interest rates unchanged in the near term. Traders have now largely abandoned bets on rate cuts this year, a significant shift from the two cuts markets had anticipated before the Iran conflict began.