Dollar Soars as Oil Prices Skyrocket Amid Middle East Tensions

The US dollar strengthened on Friday as Treasury yields surged due to inflation concerns triggered by Middle East conflicts and renewed trade tensions. The dollar index, which measures its value against a basket of currencies, hit a three-week high at 101.41.

Brent oil prices climbed above $100 a barrel after two Saudi oil tankers were attacked in the Red Sea, further fueling inflation worries. US President Donald Trump vowed 'major military punishment' for Iran and its Houthi allies, which could exacerbate supply disruptions and push up oil prices.

Vishnu Varathan, head of macro strategy at Mizuho, warned that a 'double whammy' of tariffs and oil price shocks would hit the global economy. The US Treasury Department's warning against excessive yen volatility and calls for further interest rate hikes by the Bank of Japan added to the dollar's strength.

The euro and sterling both declined as investors sought safe-haven assets, while Asian shares sank due to rising inflation concerns. Gold prices also fell as investors turned away from non-yielding assets in favor of higher-interest-bearing investments.