Quick overview

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Meanwhile, safe-haven assets such as precious metals and cryptocurrencies posted losses during the conflict.

Amid the ongoing war in the Middle East, the dollar has emerged as the week’s only clear winner. The U.S. currency rose 0.6% to 99.31, resuming its climb toward a more than three-month high, and is up 1.6% so far this week.

During the recent volatile sessions, stocks and bonds — as well as traditional safe-haven assets ranging from precious metals to cryptocurrencies — suffered notable declines. In contrast, the dollar quickly reversed its initial losses and moved higher, leaving the euro down 0.2% at $1.1608 and the British pound down 0.27% at $1.3335.

“It seems there’s no escape. Traditional safe havens like gold are not playing their usual role,” said Bas van Geffen, a macro strategist at Rabobank. “Given the strong appreciation of the DXY index and the dollar’s liquidity, it appears to be the king.”

Uncertainty over global interest rates

Rising energy prices have heightened concerns about a potential resurgence of inflation, which could reshape the outlook for interest rates among major central banks.

According to CME FedWatch, traders are now pricing in only a 34% chance that the Federal Reserve will cut rates in June, down from 46% a week ago. Meanwhile, expectations for rate cuts by the Bank of England have also eased.

By contrast, markets have increased their bets on European Central Bank rate hikes later this year. “Beyond market participants, it is now central banks that are increasingly concerned about the return of inflation,” said Thierry Wizman, global FX and rates strategist at Macquarie Group.