Dollar holds firm as Middle East hostilities lift oil

The U.S. dollar maintained its strength on Wednesday as Middle East unrest drove oil prices upward, reigniting worries about inflation. The greenback's safe-haven status was bolstered by higher Treasury yields and expectations of a Federal Reserve rate increase, despite recent economic data falling short of expectations. The U.S. carried out a series of airstrikes on Iran on Tuesday, prompting Iranian counterattacks, marking the most significant escalation in weeks.

Oil prices jumped nearly 1% in early trading on Wednesday, with Brent futures climbing 0.92% to $95.52 a barrel and U.S. West Texas Intermediate crude increasing 0.89% to $91.02. Analysts urged continued monitoring of the Middle East situation. The dollar index, which tracks the greenback's value against a basket of currencies, stood at 99.67.

August's employment and inflation data, released before the Federal Reserve's September 15 to 16 meeting, were below market expectations. However, financial markets have embraced the likelihood of a September rate hike, with CME Group's FedWatch tool now forecasting a 67% probability, up from around 40% a week earlier.