Dollar Surges on Middle East Tensions and Rising Oil Prices

The US dollar has continued to surge in value against other major currencies following increased tensions between the US and Iran in the Middle East. Oil prices jumped over 5% after a series of strikes, further fueling expectations that the Federal Reserve will raise interest rates next month.

The probability of a September rate hike has risen to 70%, with market participants anticipating around 65 basis points worth of rate increases by July 2027. Treasury yields have also climbed, reaching their highest level since November 2023, driven primarily by inflation fears rather than concerns over US debt.

In other economic news, the Bank of Japan's Governor Ueda has hinted at raising interest rates in September, citing accommodative financial conditions. Meanwhile, the Reserve Bank of New Zealand's decision to hike interest rates by 25 basis points was seen as less hawkish than expected, with officials indicating further increases may be necessary but not urgent.