Dollar Holds Firm Amid Escalating Middle Eastern Tensions

The US dollar remained strong on Wednesday as tensions in the Middle East escalated, pushing oil prices higher and raising inflation concerns. The situation is expected to impact the global economy, with Brent futures up 0.92% at $95.52 a barrel and U.S. West Texas Intermediate (WTI) crude 0.89% firmer at $91.02.

According to Kumiko Ishikawa, a senior FX analyst at Sony Financial Group, 'Continued vigilance is needed over the situation in the Middle East today.' The dollar index was at 99.67, while money markets have reinforced expectations of a Federal Reserve rate hike following Fed Chair Kevin Warsh's speech at Jackson Hole last week.

Markets are now pricing in a 67% chance of a September Fed hike, up from around 40% a week earlier, according to CME Group's FedWatch tool. The US Treasury Secretary voiced strong support for 'decisive' monetary steps to combat yen weakness in a meeting with BOJ Governor Kazuo Ueda.