The US Dollar Index (DXY) climbed above 99.80 on Monday, marking a notable psychological level that reflects sustained bullish sentiment amid escalating Middle East tensions. As reported by Reuters, the index rose 0.16% to 99.80, building on the previous session's surge above 99.50 that signaled heightened risk aversion as investors flocked to the safety of the greenback. The index, which measures the dollar against a basket of six major currencies including the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc, has maintained its upward trajectory as geopolitical tensions continue to drive safe-haven demand. According to CNBC, Zachary Hill, head of portfolio management at Horizon Investments, noted that "Everyone has gotten tired of the back and forth," but each time Middle East tensions flare up, "it's of a smaller magnitude than what we saw prior."
The war has intensified Iran's economic crisis, squeezing household budgets and hurting businesses as millions of middle-income families face poverty. Mina, a housewife in Iran, told DW that "Since the war started last year, we have become poorer every day." She reported that "I honestly can't remember the last time I bought red meat. We replaced it with chicken, but even chicken has become a luxury." The International Monetary Fund forecasts Iran's economy will contract by 5.4% this year, while inflation is expected to approach 69%. Ahmad Alavi, a Sweden-based researcher, told DW that Iran entered the conflict with inflation already above 40%, a weakening currency, chronic budget deficits and years of sanctions. He estimates that between 3.5 and 4.5 million more Iranians have fallen into poverty since the conflict intensified, bringing the total number of people living below the poverty line to more than 40 million. Food prices have risen dramatically, with bread and cereals increasing by around 140%, meat and poultry by 135%, dairy products by more than 116%, and edible oils by over 200%.
Gold prices fell 0.2% to $4,332.68 an ounce on Monday, retreating from the seven-week peak reached in the previous session despite Friday's surge to $4,409.81 per ounce following weak U.S. payroll data. As reported by Reuters, U.S. Gold Futures dropped 0.2% to $4,391.60, with the stronger dollar making greenback bullion prices more expensive for holders of other currencies. The precious metal remains capped by the U.S. - Iran conflict and tensions along the Strait of Hormuz, which keeps the threat of inflation and higher energy prices alive while shielding the greenback against further losses. Silver spot rose 0.6% to $63.94 an ounce, while platinum fell 0.5% to $1,736.20 and palladium dropped 1.5% to $1,357. Gold's appeal as an inflation hedge is diminished in an environment of high interest rates, with increased oil prices potentially causing inflation fears and interest rates to rise for longer.
The US dollar flexed its muscles on Monday, climbing against nearly every major counterpart in a broad-based rally, with only the British pound managing to eke out a gain against the greenback. As reported by Reuters, the Japanese yen suffered the steepest losses, with the USD-JPY pair falling 0.83% to 159.12 dollars per yen, though analysts at Nomura note that USD/JPY breaking 160 in the near term appears unlikely due to market vigilance over further U.S. and Japanese yen buying intervention. The euro weakened against the dollar, with the EUR-USD pair slipping to $1.1546, down 0.14%, as investors favoured the safety of the US currency amid cautious global sentiment. The British pound proved to be the sole outlier, defying the broader trend with the GBP-USD pair edging up to $1.3512, registering a modest gain, supported by resilient UK economic data. Commodity-linked currencies also fell prey to the dollar's advance, with the Australian dollar retreated and the Swiss franc, traditionally a safe-haven play, was not spared.
US stock markets delivered mixed performance on Monday as uncertainty over President Donald Trump's ability to close a deal with Iran on the opening of the Strait of Hormuz kept buyers on the sidelines. According to CNBC, the Standard and Poor's 500 slipped 4.62 points, or 0.06% to close at 7,753.02, as a late-day fade erased earlier modest gains. The blue-chip Dow Jones Industrial Average fell 60.83 points, a decline of 0.11% to settle at 53,976.10, while the tech-heavy NASDAQ Composite underperformed its peers, dropping 85.26 points, or 0.32% to finish at 26,605.36. Trading volumes were relatively subdued, with 2.588 billion shares changing hands on the S&P 500, 399.83 million on the Dow, and 6.646 billion on the Nasdaq. Canada's S&P/TSX Composite Index provided a bright spot, rising 77.10 points, or 0.21% to end the day at 36,458.33**, supported by strength in energy and financial stocks. Nvidia announced overnight that it had partnered with six major banks to launch compute finance platforms, aiming to raise over $500 billion for AI infrastructure, highlighting the scale of investment in the artificial intelligence sector.
