Dollar Surges as Iran Tensions Fuel Hawkish Fed Bets

The US dollar strengthened on Monday, reaching near a two-month high as tensions between the US and Iran pushed up oil prices. The euro and sterling were both 0.1% weaker against the dollar, hovering near multi-month lows.

Oil prices climbed more than 1% with Brent crude futures last above $106 a barrel after US President Donald Trump rejected a peace deal with Iran to resolve their conflict and reopen the Strait of Hormuz.

The heightened energy supply risks and robust fundamentals in the US have prompted traders to price in a more hawkish Federal Reserve, which is expected to lead to further policy tightening. The market's focus will turn to US data releases this week, including the PCE Index on Wednesday and non-farm payrolls on Friday.