The Canadian dollar slipped on Monday from a level close to its highest point in nearly a month against the US dollar, but it continued to post gains against some other G10 currencies as the surge in oil prices driven by the war in the Middle East influenced investor sentiment.

The Canadian currency, known as the “loonie,” fell 0.1% to C$1.3585 per US dollar, or 73.61 US cents, after touching its strongest level since February 11 at C$1.3523 earlier in the session. Meanwhile, the Canadian dollar rose 0.2% against the euro.

Mark Chandler, chief market strategist at Bannockburn Global Forex, said: “Many people see the strength of the Canadian dollar and its relative performance and link that to higher oil prices.”

He added: “But the more durable long-term relationship is that when the US dollar is strong, Canada behaves like a proxy for it. When the US dollar rises, the Canadian dollar tends to rise against other currencies as well.”

The US dollar, considered a safe-haven asset, gained against a basket of major currencies, while stocks on Wall Street declined amid concerns that a prolonged conflict in the Middle East could disrupt global energy supplies and weigh on economic growth.

Both the United States and Canada are major oil producers, and crude prices climbed to nearly a four-year high of $119.48 per barrel before easing slightly later.

Canadian trade data for January is scheduled for release on Thursday, while the February employment report will be published at the end of the week. However, the impact of these data on the Bank of Canada’s interest rate decision expected next week may be limited.

Chandler said: “I fear the war has made all economic data stale or less relevant.”

Data released Friday by the US Commodity Futures Trading Commission showed that speculators reduced bullish bets on the Canadian dollar, with net non-commercial long positions falling to 21,050 contracts as of March 3, down from 27,578 the previous week.

In Canada’s bond market, yields were mixed along a flatter curve, with the two-year yield rising 3.8 basis points to 2.674%, while the 10-year yield fell 1.5 basis points to 3.399%.

Aluminum prices climbed to levels not seen in four years on Monday as concerns intensified over prolonged shipping disruptions in the Middle East following the war between the United States and Israel against Iran, raising fears about supply shortages of the metal.

However, the benchmark aluminum price later fell 1.7% to $3,386 per metric ton at 11:05 GMT after earlier touching $3,544 per ton, its highest level since March 2022, when the metal used in transportation, construction, and packaging reached a record of $4,073.50 per ton.

The conflict in the Middle East has led to a near-total closure of the Strait of Hormuz, through which aluminum shipments produced in the region normally pass on their way to the United States and Europe.

Ed Meir, an analyst at Marex, said: “Europeans are particularly concerned, as the shutdown of aluminum production in the Gulf coincides with the long-term supplier Mozal going offline this month.”

He added: “Some producers are trying to rely on inventory outside the region to meet their commitments, but we believe that will be difficult given the large volumes of Russian metal on exchange (currently under sanctions) and generally low inventory levels.”

In December, South32 announced that the Mozal smelter, which has an annual capacity of 560,000 metric tons, would be placed under temporary maintenance starting in mid-March after negotiations with utilities and the Mozambican government failed to reach a new power agreement.

Supply concerns have also pushed the aluminum cash contract premium over the three-month futures contract from a discount, or contango, into a premium, or backwardation. The premium rose to $47.4 per ton on Friday, the highest level since February 2022, and was last seen around $32 per ton.

Prices across the forward curve through 2036 also indicate persistent backwardation.

In other metals, rising oil prices have increased expectations of slower global growth and weaker demand for industrial metals, which have also faced pressure from the stronger US dollar.

Copper fell 0.6% to $12,789 per ton.

Zinc rose 1.8% to $3,357 per ton.

Lead declined 0.8% to $1,937 per ton.

Tin dropped 3.3% to $48,426 per ton.

Nickel fell 0.6% to $17,360 per ton.

Bitcoin hovered near the lower boundary of its consolidation range around $67,000 on Monday after failing last week to break through a key resistance zone.

Institutional inflows continue to provide some support for the cryptocurrency, as spot Bitcoin exchange-traded funds recorded positive inflows for the second consecutive week. However, analysts warn that caution is warranted, as the ongoing war between the United States and Iran has pushed oil prices to their highest levels since mid-June 2022, raising concerns about renewed inflationary pressures that could negatively affect high-risk assets such as Bitcoin.

Why rising oil prices could hurt risk assets

The war between the United States and Iran entered its tenth day on Monday, a relatively prolonged conflict that has weighed on global investors and weakened risk appetite, limiting Bitcoin’s upside.

Over the weekend, tensions escalated further after the United States and Israel carried out a joint operation targeting several Iranian storage facilities.

Oil prices had already surged after the closure of the Strait of Hormuz last week, which disrupted oil shipping routes and reduced global supplies.

The latest strikes tightened supply conditions even further, pushing West Texas Intermediate crude to $113.28 during Monday’s Asian trading session — a level not seen since mid-June 2022.

At the time of writing, prices were seeing a slight correction following reports that the International Energy Agency is discussing with G7 countries the possibility of a coordinated release of emergency oil reserves to stabilize markets.

Such a move could temporarily increase supply and curb the sharp rise in prices.

In the longer term, however, risks remain. Persistently high oil prices increase global inflationary pressures as higher energy costs feed into transportation and production sectors, raising the prices of goods and services.

This could create a high-inflation environment that forces central banks to tighten monetary policy, which would weigh on high-risk assets like Bitcoin because higher borrowing costs reduce market liquidity and increase demand for safer, fixed-income assets.

Institutional demand for Bitcoin remains strong

Institutional demand for Bitcoin remained solid last week, signaling a degree of investor confidence despite ongoing geopolitical tensions.

According to data from SoSoValue, spot Bitcoin ETFs recorded inflows of $568.45 million last week, following $787.31 million in positive inflows the previous week.

If these inflows continue and accelerate, Bitcoin prices could recover in the coming weeks.

Could Bitcoin become “digital gold”?

QCP Capital said in a report on Monday that global equity markets have become more defensive amid rising uncertainty.

The report added that US Treasury bonds and gold also failed to attract their usual safe-haven demand, as both came under pressure due to rising oil prices that sparked inflation concerns and pushed bond yields higher.

Instead, the US dollar has emerged as the preferred defensive asset, supported by rising yields and the fact that the United States is a net energy exporter.

The report noted that although most risk assets have weakened under current market pressures, Bitcoin has shown notable resilience — a pattern not seen in the cryptocurrency market for some time.

It concluded that although Bitcoin has not yet fully achieved the concept of “digital gold,” its practical use as a “digital escape asset” is becoming more relevant, particularly in Gulf countries during periods of currency volatility and political instability.

Bitcoin price outlook

Bitcoin was trading around $67,600 as of Monday, with a slightly bearish bias in the near term, as the price remains below the 50-week exponential moving average near $90,000 and the 100-week EMA near $84,000, while hovering close to the 200-week EMA.

The weekly Relative Strength Index stands at 29 within oversold territory but remains weak, suggesting continued bearish pressure.

The Moving Average Convergence Divergence indicator also remains below the signal line and below the zero level, although the shrinking histogram bars indicate weakening downside momentum without a clear bullish reversal yet.

The next key support level lies at $60,000, reinforced by an ascending trendline near $55,500, where buyers are expected to defend the broader bullish cycle structure.

If the $60,000 level breaks decisively, however, the price could move toward deeper corrections, particularly after losing the 61.8% Fibonacci retracement of the rally between $49,000 and $126,200 near $78,490.

On the upside, the first resistance lies near the 23.6% retracement level around $108,000, followed by a previous trading range near $115,000. The current bearish trend would only fade with a weekly close above this area.

Short-term technical outlook

On the daily chart, Bitcoin is trading within a parallel channel, with resistance near $71,980, keeping a slight bearish bias in place despite the recent rebound toward the middle of the channel.

The price is also trading below the 50-day and 100-day exponential moving averages at $73,263 and $80,648 respectively, signaling a continuation of the broader negative trend.

The daily RSI stands at 46, below the midpoint level of 50, reflecting weak momentum.

The MACD remains above the signal line, but fading momentum from recent peaks suggests a slowdown in bullish pressure.

Immediate resistance appears near the upper boundary of the channel around $71,980, where a price rejection would maintain the short-term downtrend.

However, a daily close above this level could open the way toward the $73,000 region.

On the downside, the first support lies at the channel floor near $65,120, while a break below this level could lead to a test of the key psychological level at $60,000.

As long as Bitcoin remains trading between $65,120 and $71,980, the price will likely continue moving within a downward-sloping corrective channel.

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.