Dollar Holds Firm Amid Escalating Middle East Tensions

The US dollar held firm on Wednesday as hostilities in the Middle East pushed oil prices higher and revived inflation concerns.

Renewed violence between Iran and the US, which included airstrikes and Iranian retaliation, prompted a surge in oil prices, with Brent futures up 0.92% at $95.52 a barrel and US West Texas Intermediate (WTI) crude 0.89% firmer at $91.02.

'Continued vigilance is needed over the situation in the Middle East today,' said Kumiko Ishikawa, a senior FX analyst at Sony Financial Group.

The dollar's safe-haven appeal has been reinforced by rising Treasury yields and growing expectations of a Federal Reserve rate hike, with markets 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.