USD Rallies on Hormuz Crisis, Hawkish Central Banks Fuel Volatility

The US dollar is broadly firmer across G10 pairs as geopolitical tensions in the Strait of Hormuz drive aggressive safe-haven positioning. The escalating conflict between Iran and Gulf states has sent energy prices surging, with Brent crude jumping sharply, feeding through into inflation expectations globally. Central banks are responding with increasingly hawkish rhetoric, as rising energy costs threaten to derail disinflation progress. The Federal Reserve, ECB, and Bank of England are all signaling that rate cuts may be delayed further, supporting yield differentials in favor of the dollar. EUR/USD is under pressure as European economies face disproportionate exposure to energy price shocks, while USD/JPY remains elevated despite verbal intervention warnings from Japanese officials. The broader FX landscape reflects a classic risk-off rotation, with CHF and USD outperforming while AUD and NZD lag on deteriorating global growth sentiment. Traders should prepare for heightened volatility as geopolitical headlines and central bank communications dominate price action this week.