Dollar Surges to Near Two-Week High on Middle East Tensions

The US dollar surged to a near two-week high on Wednesday, driven by renewed hostilities in the Middle East and rising oil prices. The dollar index rose 0.11% to 99.79, its highest point since August 17, as investors sought safe-haven assets amid inflation concerns.

The recent escalation in the Middle East, which saw a barrage of airstrikes on Iran followed by Iranian retaliation, fueled expectations of higher oil prices and interest rates. The Brent futures price increased 1.15% to $95.74 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 0.85% to $91.05.

Analysts attributed the dollar's strength to its appeal as a safe-haven asset, driven by rising Treasury yields and growing expectations of a Federal Reserve rate hike. The US central bank is now pricing in a 68% chance of a September rate hike, up from around 40% a week earlier.