USD Faces Uncertainty as US-Iran Conflict Fuels Risk-Off Sentiment

Risk sentiment remains fragile as the ongoing US-Iran geopolitical conflict continues to inject volatility into currency markets. Safe-haven currencies such as JPY and CHF saw initial demand as traders moved to reduce risk exposure at the start of the week. However, mixed headlines created whipsaw price action: Iranian media first reported that the US would propose a temporary waiver on sanctions, briefly lifting risk appetite and pushing safe havens off session highs. US officials subsequently denied the report, reinstating the cautious tone across markets. The USD traded with a mixed bias, gaining against risk-sensitive currencies like AUD and NZD while weakening against traditional safe havens. Oil prices also fluctuated on the conflicting headlines, adding another layer of uncertainty for commodity-linked currencies such as CAD. Traders should monitor developments closely, as any escalation or de-escalation in tensions could trigger sharp moves in USD/JPY, USD/CHF, and commodity-linked pairs. Near-term positioning is likely to remain defensive until clarity emerges on the diplomatic front.