Dollar Holds Firm as Middle East Hostilities Drive Oil Prices Higher

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

Rising Treasury yields and growing expectations of a Federal Reserve rate hike have bolstered the currency's safe-haven appeal, with markets now pricing in a 67% chance of a September Fed hike, up from around 40% a week earlier.

The US launched a barrage of airstrikes on Iran on Tuesday, prompting Iranian retaliation in the most serious escalation in weeks. Oil prices rose nearly 1% in early trade on Wednesday, with Brent futures up 0.92% at $95.52 a barrel and US West Texas Intermediate (WTI) CLc1 0.89% firmer at $91.02.

The dollar index stood at 99.67, while the kiwi dollar was slightly softer at $0.5889 ahead of a Reserve Bank of New Zealand policy decision later in the session.