Dollar rises as Middle East conflict lifts oil, Fed hike looms

The U.S. dollar climbed on Monday due to a surge in Middle Eastern tensions spiking oil prices and investors seeking the safe-haven currency, while they awaited the Federal Reserve's first rate hike in over two years. Leaders of leading AI firms cautioned about potential AI risks, further bolstering risk sentiment and aiding the dollar.

The U.S. dollar index climbed 0.3% to 99.41, after briefly reaching its highest in nearly a year at 99.735. The euro hit a one-month low against the dollar at $1.153, and the British pound dipped by 0.2% to $1.3512. Oil prices surged, with Brent crude climbing up to $105.61 per barrel, driven by Houthi attacks on Saudi Arabia and the threat to the Red Sea.

Diplomatic talks between Iran and Gulf nations appeared to stall, and supply concerns mounted due to attacks on ships in the region. Market analysts predict a 90% chance the Fed will raise interest rates on Wednesday, boosting the dollar's strength. However, a potential dovish rate hike from the Fed could negatively impact the USD.

The Japanese yen weakened, and markets expect the Bank of Japan to raise rates on Friday, while the Bank of England is anticipated to maintain rates but may hike later in the year. Cryptocurrency Bitcoin gained 2% to $79,152.23.