Markets on edge, dollar holds as Iran tensions flare

Geopolitical risks keep the dollar strong as markets eye the Strait of Hormuz.

SINGAPORE: The U.S. dollar remained steady on Monday, while the Japanese yen hovered near the critical 160-per-dollar mark, as investors navigated the uncertainties of the escalating conflict between the U.S. and Iran. Market focus sharpened on a new deadline set by U.S. President Donald Trump to reopen the strategically vital Strait of Hormuz.

In a fiery social media post over Easter weekend, Trump warned that Iran’s power plants and bridges could be targeted if the waterway isn’t reopened by 8 p.m. Eastern Time Tuesday (0000 GMT). The message, heavy with expletives, added fresh tension to already jittery markets.

Despite the stern warning, speculation about a ceasefire offered a glimmer of hope. Media reports suggest that negotiators are pursuing a last-ditch effort to halt hostilities, potentially securing a 45-day truce that could pave the way for a longer-term peace.

“Every new ultimatum makes the disruption look longer and stickier,” said Charu Chanana, chief investment strategist at Saxo in Singapore. “It’s not that investors expect war tomorrow, but each threat raises macroeconomic uncertainties.”

Currency movements reflected this cautious mood. The euro traded at $1.1523, while sterling hovered at $1.3211. The dollar index, which measures the U.S. currency against six major rivals, dipped slightly to 100.12. Meanwhile, the Australian dollar nudged up 0.3% to $0.69045, attempting to shake off its recent two-month low.

Oil markets remained on edge. With Tehran’s effective closure of the Strait of Hormuz—a key corridor for roughly a fifth of the world’s oil and LNG—the price of Brent crude climbed above $110 per barrel, stoking fears of higher inflation and slowing global growth.

“If the strait reopens on Trump’s deadline, oil will drop and risk assets could surge,” said Prashant Newnaha, senior rates strategist at TD Securities. “But any escalation would trigger sharp market repricing. Right now, it’s a binary event.”

In Tokyo, the yen showed limited reaction to the turmoil, trading at 159.55 per dollar. Japanese Finance Minister Satsuki Katayama reiterated readiness to intervene against speculative currency moves, though many analysts doubt any significant impact as global demand for the dollar remains relentless.

As traders weigh geopolitical risks against economic data showing calm U.S. labor markets, all eyes remain on the Strait of Hormuz and whether diplomacy can prevent further escalation.