Iran Conflict Drives Dollar, Oil Higher; Rate Cuts Delayed

The U.S. dollar has surged to a three-and-a-half-month high, with the DXY index reaching 100.299, as investors seek safe-haven assets. Concurrently, oil prices have rallied, pushing Brent crude above $102 a barrel, a trend reinforced by President Trump's focus on nuclear non-proliferation over energy costs.

The U.S. economy, benefiting from its net oil exporter status, is relatively insulated from higher energy prices, granting the Federal Reserve flexibility. Market pricing now indicates the Fed may postpone interest rate cuts until next year, a notable shift from earlier expectations of multiple cuts this year.

Conversely, the euro has weakened to a seven-month low of $1.1431 against the dollar, reflecting the Eurozone's vulnerability as a major energy importer. The European Central Bank faces a challenging dilemma, potentially forced to raise rates by July to combat inflation even amid weak growth.

Analysts anticipate prolonged energy supply disruptions, suggesting continued dollar strength and euro weakness.