USD/JPY Holds Steady Amid Oil Rebound and Middle East Tensions

The Japanese Yen has held firm despite concerns over oil prices and Middle East tensions. The USD/JPY pair is trading around 163.70, after slipping from a modest advance in the previous session.

The rebounding oil prices and renewed geopolitical risks are pressuring the Yen due to Japan's reliance on energy imports. Markets are pricing a 30.5% chance of an immediate Fed rate hike and a 76.6% probability of a September increase, suggesting persistently high borrowing costs.

Fresh hostilities in the Middle East have intensified geopolitical tensions, keeping inflation concerns and the broader interest rate outlook in focus for investors. The US Dollar may draw additional support from heightened risk aversion after an Iranian attack targeted US forces across the region.