US Dollar Stabilizes as Iran Tensions Escalate

The US Dollar has steadied after last week's sell-off following the US Treasury's announcement to increase longer-dated bond buybacks. The move sparked concerns over the country's fiscal outlook and rising government debt, which weighed on the Greenback.

Market attention has now shifted back to US-Iran tensions after Washington unveiled a fresh sanctions campaign against Tehran. The US Treasury Secretary Scott Bessent launched 'Operation Economic Outcast' on Monday, tightening economic pressure on Iran by expanding the scope of secondary sanctions targeting entities and countries that transact with Iran.

The operation has sanctioned around 60 Iran-linked individuals, entities, and vessels tied to the country's nuclear, missile, cyber, and Oil networks. Iran has warned that the tougher pressure could lead to a wider confrontation, with a senior Iranian official threatening to halt Oil exports through the Strait of Hormuz and elsewhere in the Persian Gulf.

The geopolitical tensions are keeping a floor under the US Dollar, although the upside appears limited. The US Treasury's move has revived concerns over the country's fiscal outlook and rising government debt. The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, trades around 99.05 on Monday after falling to a three-month low of 98.56 last week.