Middle East Risks Continue to Support the Dollar | High Oil Prices and Elevated Rates Keep USD Strong
Summary of the Day
The Middle East situation remains deadlocked.
- The United States
- Israel
- Iran
have yet to reach any meaningful compromise,
and markets continue to price in geopolitical risk.
→ High oil prices and elevated interest rates are maintaining the bullish dollar trend.
The Core of the Current Market
“Inflation-driven dollar strength caused by Middle East tensions.”
- Rising oil prices
- Inflation concerns
- Reduced expectations for Fed rate cuts
→ These factors continue to support the U.S. dollar.
FX Market Overview
- USD/JPY: Around 159
- EUR/USD: Softening toward the mid-1.15s
- GBP/USD: Falling toward the 1.33s
→ Broad dollar strength remains intact.
At the same time,
USD/JPY remains nervous around the 159 level.
→ Intervention concerns continue to weigh on sentiment.
Oil and Interest Rates
During the London session:
- Crude oil pulled back toward the $101 range
- U.S. yields eased slightly
However,
the dollar correction remained extremely limited.
→ The market still believes:
“The Middle East issue is far from over.”
Key Events Today
- FOMC Minutes
- U.S. Weekly Crude Oil Inventories
- NVIDIA earnings
Particular attention will be paid to whether the FOMC discussed:
inflation risks driven by rising oil prices.
Main Focus Going Forward
- Whether oil can remain above $100
- Intervention concerns around the 159 yen level
- Middle East headlines
- U.S. interest rate movements
→ Overall dollar conditions remain very strong.
Possible Scenarios Ahead
1) Middle East tensions continue
→ Oil prices stay elevated
→ Dollar strength continues
2) Oil prices establish a sustained decline
→ Dollar rally temporarily cools
3) USD/JPY approaches 159–160
→ Intervention concerns intensify sharply
Strategic View
- Buy-the-dip strategy for the dollar remains favored
- Extra caution is required specifically in USD/JPY
- Oil prices and U.S. yields remain the top indicators to monitor
Conclusion
The current market can be summarized as:
“A market where Middle East risks continue to support the dollar.”
→ Even when oil pulls back, the dollar is struggling to weaken.
→ The most important themes now are:
whether oil can hold above $100,
and the battle around the 159 yen level.
