USD Surges as Red Sea Shipping Disruption Threatens Oil Supply Routes

The US dollar is strengthening against risk-sensitive currencies as escalating Red Sea shipping disruptions introduce fresh geopolitical risk into forex markets. Reports indicate Iran has instructed Houthi forces to close Red Sea oil routes if the US strikes Iranian power infrastructure, with Reuters shiptracking data confirming four tankers have already altered course. Saudi crude tankers have been forced to turn back due to the Houthi blockade threat, compounding existing concerns over the Strait of Hormuz closure. The disruption threatens a critical global shipping corridor handling approximately 12% of world trade, driving crude oil prices sharply higher and boosting commodity-linked volatility. USD/CAD faces downward pressure as rising oil prices support the Canadian dollar, while USD/JPY is bid as safe-haven flows into the dollar compete with yen demand. AUD/USD and NZD/USD are under selling pressure as risk appetite deteriorates. Traders should monitor further escalation signals, as a sustained Red Sea blockade could amplify inflationary pressures globally, potentially influencing central bank rate expectations across G10 economies.