Dollar Surges as Middle East Tensions Fuel Inflation Concerns

The dollar strengthened on Wednesday as renewed hostilities in the Middle East drove oil prices higher and revived inflation concerns. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose to its highest point since August 17 at 99.79.

Oil prices surged after the U.S. launched airstrikes on Iran, prompting Iranian retaliation. Brent futures increased by 1.15% to $95.74 a barrel, while U.S. West Texas Intermediate (WTI) crude rose by 0.85% to $91.05.

Despite recent economic data coming in below forecasts, the Federal Reserve's rate hike expectations are growing, with markets now pricing in a 68% chance of a September Fed hike, up from around 40% a week earlier.