Dollar Soars as Trade Wars and Middle East Tensions Ignite Inflation Fears

The US dollar rose to new heights on Friday, fueled by surging Treasury yields and inflationary pressures sparked by renewed trade tensions and Middle East conflicts.

Oil prices climbed back above $100 a barrel for the first time since May after Yemen's Houthis struck two Saudi oil tankers in the Red Sea, extending the conflict to a second major shipping chokepoint. US President Donald Trump threatened 'major military punishment' for Iran and its Houthi allies.

The Trump administration also announced new tariffs of 10% and 12.5% on goods from 60 trading partners over allegations of lax enforcement of forced labor bans, adding to the inflationary pulse.

Vishnu Varathan, Mizuho's head of macro strategy for Asia-Pacific, warned that 'the world must be prepared for a double whammy of tariffs' and predicted that US Treasury yields could hit 6% in the near future. The benchmark 10-year yield rose to an over 18-month high above 4.7%, while the 30-year yield held well above 5%.