Middle East Conflict Lifts Oil Prices, Boosting US Dollar and Bitcoin

The ongoing conflict in the Middle East has pushed up oil prices, causing investors to flock towards safe-haven currencies such as the US dollar. The US dollar index rose by almost 0.6% on Monday, its highest since September 2, while the euro fell to a one-month low of $1.153 and the British pound dropped 0.5%. Brent crude prices surged by 3% to $108 a barrel due to Houthi strikes on Saudi Arabia's main pipeline, adding to concerns about energy supplies.

The potential for further rate hikes from the Federal Reserve has also contributed to the dollar's strength, with investors bracing for the first interest rate increase in over two years. Money markets pointed to a 90% chance of a rate hike on Wednesday, up from around 60% a week ago. The dollar's recent firmness was not without risks, however, as an unchanged decision from the Fed would be a shock to markets and negative for the USD.

The conflict in the Middle East has also weighed on global bond yields, which have moved towards multi-year highs. The Japanese yen was notably weak, giving up some of its recent gains that were driven by rising bets on Bank of Japan rate hikes. Bitcoin edged up for a second straight session, last up 0.6% to $77,805.