USD Strengthens as US-Iran Tensions Escalate, Strait of Hormuz Closure Persists

The US dollar is opening the week with safe-haven demand as US-Iran military tensions intensify, with both sides exchanging strikes over the weekend despite earlier diplomatic overtures. President Trump confirmed the ceasefire is over while suggesting talks may continue, creating a contradictory geopolitical backdrop. The de facto closure of the Strait of Hormuz—a critical chokepoint for global oil shipments—has sent crude oil prices surging approximately 4%, adding inflationary pressures that could complicate the Federal Reserve's rate path. Gold, typically a safe-haven beneficiary, has paradoxically slid over 1%, likely due to margin calls and liquidity needs amid broader equity selloffs. USD/JPY and USD/CHF are key pairs to monitor as traders rotate into traditional safe havens. The Japanese yen and Swiss franc are expected to strengthen against risk-sensitive currencies like AUD and NZD. Traders should watch for further escalation headlines, as any expansion of the conflict zone could trigger sharp moves across forex markets, particularly in oil-correlated pairs like USD/CAD.