Dollar Rallies on US-Iran Tensions, Brent Prices Fall Amid Sanctions

The US dollar has staged a three-day rally to its highest levels since May, driven by escalating trade tensions between the US and Canada, as well as Washington's imposition of sweeping sanctions against Iran.

The sanctions, launched by Scott Bessent's 'Operation Economic Outcast', target more than 60 organisations and aim to monitor every hub, intermediary, and network used by Tehran to smuggle oil and circumvent restrictions.

Brent crude prices reacted with a fall following a six-day rally, in line with the 'buy the rumour, sell the fact' principle. However, analysts warn that the long-term prospects of Iran's isolation are negative for the oil market, implying a further reduction in supplies and rising prices.

China's role remains a key concern, as it buys around 90% of its oil from Iran. Beijing's reluctance to compromise with the US risks triggering a new trade war and a slowdown in the global economy, driving investors to seek safe havens in the greenback.