US-Iran tensions push oil up 6%; Dollar strengthens

U.S.-Iran tensions escalated over the weekend and into Monday after U.S. forces detained an Iranian cargo ship and reports emerged that the Islamic Revolutionary Guard Corps targeted tankers. Maritime was largely halted and ceasefire talks stalled ahead of a two-week truce set to expire Tuesday.

Oil prices climbed more than 6% in early Monday trading on the news. Market participants moved into safer assets and the U.S. dollar strengthened, pushing the dollar index to about 98.24, a one-week high.

President Donald Trump had said on Friday that the Strait of Hormuz was “completely open,” but reports of attacks within 24 hours of that statement coincided with renewed concern about operations in the Gulf.

Major currencies were weaker against the dollar: the euro traded near $1.1754, sterling around $1.3497 and the Australian dollar near $0.7145. On technical charts, traders noted support for the dollar index near 97.70, with immediate resistance around 98.73 and further upside targets near the 99.21–99.35 area where the 100- and 200-day moving averages converge.

Precious metals and equities showed mixed moves. Gold opened about $40 below Friday's close, fell to a daily low near $4,737 per ounce and recovered toward the $4,800 level. European equities opened lower, with the STOXX 50 down about 1.3% and the STOXX 600 off roughly 0.9%. Travel and leisure stocks led declines while energy stocks outperformed; Shell rose about 2.5%.

U.S. stock futures were lower and the CBOE Volatility Index rose to about 19.73 after an eight-session decline. Japan’s Nikkei 225 diverged from the broader risk-off tone, closing up 0.60% at 58,824.89, and the Topix climbed 0.43% to 3,777.02.

Diplomatic activity is focused on talks scheduled to take place in Pakistan this week. Officials are watching for the physical presence of Iranian negotiators as parties consider whether to extend the ceasefire beyond Tuesday.

Other events on the calendar this week include Kevin Warsh’s Senate confirmation hearing for the Federal Reserve chair position and U.S. retail sales data for March, both of which market participants will monitor for clues on monetary policy and consumer spending.