The US dollar jumped on Monday as oil prices surged sharply, pushing investors toward cash amid fears that a prolonged war in the Middle East could severely disrupt energy supplies and damage global economic growth.

The euro and the British pound fell about 0.5% and 0.6% respectively against the dollar. The Australian dollar and even the Swiss franc — traditionally considered a safe-haven currency — also declined by about 0.3% to 0.4%.

Nick Rees, head of macro research at Monex Europe, said the dollar clearly benefits from being relatively less exposed to Middle East risks, in addition to reclaiming its traditional role as a safe-haven asset during periods of geopolitical tension.

Stocks, bonds, and precious metals all declined on Monday as investors turned cautious and avoided risk, worried about the impact of rising oil prices on global inflation and economic growth, prompting them to take profits from some of their most successful trades.

Michael Every, global strategist at Rabobank, said that if the crisis persists for longer it could lead to a cascading chain reaction similar to falling dominoes. He added that if the situation remains unchanged into next week, it could become extremely concerning.

The dollar eased slightly during afternoon trading in Asia after a report by the Financial Times said G7 finance ministers would discuss a coordinated release of oil from emergency reserves in cooperation with the International Energy Agency.

The report pushed oil prices slightly lower after they had earlier surged close to $120 per barrel. Brent crude was last up about 13% at $104.60 per barrel after rising more than 25% earlier in the session.

Traders reassess exposure to energy shock

The euro fell 0.5% to $1.1559 after earlier dropping to a three-and-a-half-month low, while the British pound declined 0.64% to $1.3338.

Against the Swiss franc, the dollar rose 0.39% to 0.7787 francs. The Australian dollar also trimmed earlier losses to trade down about 0.25%.

Analysts said Asia may bear the largest share of the energy shock because of its heavy reliance on oil and gas imports from the Middle East, while Britain and the euro area are also highly exposed to the crisis.

The dollar was trading near 159 yen in Asian markets, rising 0.37% to 158.41 yen.

Debapali Bhargava, head of Asia-Pacific research at ING, said the real question is how high prices will rise and how long they will remain elevated, as that will ultimately determine the scale of the economic impact.

She added that a prolonged conflict, combined with continued currency weakness, could directly increase inflationary pressures across the region.

Iran announced on Monday the appointment of Mojtaba Khamenei as successor to his father Ali Khamenei as supreme leader, signaling the continued dominance of hardliners in Tehran a week after the war with the United States and Israel began.

The conflict has already suspended roughly one-fifth of global oil and natural gas supplies after Tehran targeted vessels in the vital Strait of Hormuz between its coast and Oman, along with attacks on energy infrastructure across the region.

Qatar’s energy minister told the Financial Times on Friday that he expects all Gulf energy producers may be forced to halt exports within weeks, a move that could push oil prices toward $150 per barrel.

Unexpectedly weak US employment data on Friday briefly halted the dollar’s gains and raised expectations for US interest rate cuts, but that effect faded by Monday.

Latest market pricing shows traders expecting about 35 basis points of rate cuts by the Federal Reserve by the end of the year, down from more than 55 basis points priced in at the end of February.

Kyle Rodda, senior financial market analyst at Capital.com, said these developments could ultimately delay any move by the Federal Reserve, as policymakers will need time to assess the impact of the oil price shock and its implications for economic data.

Oil prices jumped above $119 per barrel on Monday, reaching levels not seen since mid-2022 after some major producers reduced supply amid fears of prolonged shipping disruptions as the war between the United States and Israel on one side and Iran on the other continues to expand.

Brent crude futures rose $12.77, or about 14%, to $105.46 per barrel by 11:26 GMT. US West Texas Intermediate crude futures also climbed $12.66, or 14%, to $103.56 per barrel.

During a highly volatile trading session, Brent earlier reached $119.50 per barrel, marking the largest absolute daily price jump in its history, while West Texas Intermediate rose to $119.48 per barrel.

Since the last market close before the strikes launched by the United States and Israel against Iran on February 28, Brent crude has risen by as much as 66%, while West Texas Intermediate has surged 77%.

Current prices are approaching the historical peak for oil futures, which reached around $147 per barrel in 2008, according to data from the London Stock Exchange Group dating back to the 1980s.

Market structure signals a severe supply shortage

The price spread between Brent crude for immediate delivery and contracts for delivery six months later rose to a new record on Monday of around $36, according to LSEG data going back to 2004.

This level is far above the previous peak of about $23 recorded in March 2022 during the early weeks of the Russia–Ukraine war.

Such a wide gap indicates a market structure known as “backwardation,” reflecting traders’ expectations of a severe shortage in current supplies.

The Strait of Hormuz, through which roughly one-fifth of global oil and liquefied natural gas exports normally pass, is now almost completely closed.

Prices were also supported by the appointment of Mojtaba Khamenei as Iran’s new supreme leader following the death of his father Ali Khamenei, signaling continued dominance of the hardline faction in Tehran after a week of war with the United States and Israel.

Risks of rising fuel prices worldwide

The conflict could leave consumers and businesses around the world facing weeks or even months of elevated fuel prices, even if the war ends quickly, due to damage to infrastructure, supply chain disruptions, and higher maritime shipping risks.

US gasoline futures rose to their highest levels since 2022 at around $3.22 per gallon, as US President Donald Trump assured consumers that the war’s impact on living costs would remain limited ahead of the midterm elections scheduled for November.

UBS analyst Giovanni Staunovo said alternatives remain limited, such as drawing from strategic petroleum reserves, but compared with the potential scale of supply disruption if the strait remains closed for longer, such measures would amount to “a drop in the ocean.”

US Senate Democratic leader Chuck Schumer urged President Trump to release oil from the strategic reserve, while a French government source said on Monday that G7 countries will also discuss this option.

Production cuts among major producers

Saudi Aramco has begun reducing production at two of its oil fields, according to informed sources. Analysts had already warned last week that major OPEC producers, including the United Arab Emirates, might soon need to cut output as storage facilities fill up.

Oil production in Iraq from its main southern fields has also fallen by 70% as storage capacity reached its limits.

Kuwait Petroleum Corporation also began cutting production on Saturday and declared force majeure on shipments, without specifying the volume of output that would be halted.

In an attempt to deal with the closure of the Strait of Hormuz, Saudi Aramco offered more than 4 million barrels of Saudi crude in rare tenders, using the ability to redirect some exports through the Red Sea port of Yanbu.

Disruptions in gas and refining sectors

In gas markets, Qatar, the world’s largest exporter of liquefied natural gas, has already halted production after key infrastructure came under attack.

A fire also broke out in the Fujairah oil industrial zone in the United Arab Emirates after debris fell in the area, though no injuries were reported.

The supply crisis worsened with refining disruptions. Bahrain’s oil company declared force majeure after an attack on its refinery complex, while Saudi Arabia has already shut down its largest oil refinery.

Silver prices fell more than 5% in European trading on Monday, dropping below the $80 per ounce threshold, as the US dollar rose broadly in the foreign exchange market.

Rising energy costs have fueled concerns about accelerating inflation again across most of the world and have further reduced expectations for near-term interest rate cuts by the Federal Reserve.

Price Overview

Silver prices today: silver declined 5.7% to $79.65, down from the session opening level of $84.46, after reaching a high of $85.12.

At Friday’s settlement, silver rose 2.7%, marking the second gain in the past three days as prices recovered from a two-week low of $77.97 per ounce.

Last week, the white metal silver lost about 10%, marking its first weekly decline in three weeks as the US dollar strengthened amid the fallout from the Iran war.

US Dollar

The dollar index rose 0.85% on Monday to a four-month high of 99.70, reflecting broad strength in the US currency against a basket of global peers.

The rally comes as investors buy the US currency as a preferred safe-haven asset, with the Iran war entering its tenth day and signs growing of a broader military conflict in the Middle East, particularly after Mojtaba, Khamenei’s son, was selected as his successor — a move not welcomed in the United States.

Global oil prices

Global oil prices jumped about 30% on Monday, breaking above the $100 per barrel threshold for the first time since 2022 and approaching the $120 mark, as major oil producers in the Middle East cut supplies amid concerns that shipments through the Strait of Hormuz will remain disrupted.

US interest rates

According to the CME FedWatch tool from CME Group, markets are pricing a 98% probability that US interest rates will remain unchanged at the March meeting, while the probability of a 25-basis-point rate cut stands at 2%.

Markets are also pricing an 85% probability that rates will remain unchanged at the April meeting, while the chance of a 25-basis-point rate cut stands at 15%.

To reassess these expectations, investors are closely watching the release of key US inflation data for February later this week.

Gold prices fell more than 3% in European trading on Monday at the start of the week and may lose the ability to trade above the psychological $5,000 per ounce level, as the US dollar surged broadly in the foreign exchange market.

Rising energy costs have fueled concerns about accelerating inflation again across most of the world and have further reduced expectations for near-term interest rate cuts by the Federal Reserve.

Price Overview

Gold prices today: gold fell more than 3.0% to $5,014.90, down from the opening level of $5,171.83, after reaching a session high of $5,192.56.

At Friday’s settlement, gold prices rose 1.75%, marking the second gain in the past three days as prices recovered from a two-week low of $4,996.10 per ounce.

Last week, gold lost more than 2%, marking its first weekly decline in five weeks and the largest weekly drop since late December, as investors focused on buying the US dollar.

US Dollar

The dollar index rose 0.85% on Monday, reaching a four-month high of 99.70, reflecting broad strength in the US currency against a basket of major and secondary currencies.

As is well known, a stronger US dollar makes gold bullion priced in the currency less attractive to buyers holding other currencies.

The rally in the dollar comes as investors purchase the US currency as a preferred safe-haven asset, with the Iran war entering its tenth day and signs growing of a broader military conflict in the Middle East, particularly after Mojtaba, Khamenei’s son, was selected as his successor — a move not welcomed in the United States.

Global oil prices jumped about 30% on Monday, breaking above $100 per barrel for the first time since 2022 and approaching the $120 level, as major Middle Eastern oil producers cut supplies amid fears that shipments through the Strait of Hormuz will remain disrupted.

US interest rates

According to the CME FedWatch tool from CME Group, markets are pricing a 98% probability that US interest rates will remain unchanged at the March meeting, while the probability of a 25-basis-point rate cut stands at 2%.

Markets are also pricing an 85% probability that rates will remain unchanged at the April meeting, while the chance of a 25-basis-point rate cut is about 15%.

To reassess these expectations, investors are closely watching the release of key US inflation data for February later this week.

Gold outlook

Tim Waterer, chief market analyst at KCM Trade, said gold prices are falling today despite market turbulence because higher oil prices have strengthened the US dollar amid rising inflation concerns and reduced expectations for rate cuts.

He added that a large part of gold’s rally over the past twelve months had been based on expectations of looser US interest rate policy. However, with inflation risks increasing due to oil prices above $100 per barrel, rate cuts are no longer a certainty, and gold has begun to reprice accordingly.

SPDR fund

Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell by 2.57 metric tons on Friday, marking the fourth consecutive daily decline and bringing total holdings down to 1,073.32 metric tons, the lowest level since January 12.