Geopolitical tensions intensify inflation concerns, pushing the US dollar to its highest level in nearly a month.

Due to the US launching attacks on Iran, it has sparked demand for safe-haven currencies, while the rise in oil prices highlights inflation risks, causing the US dollar to rise to its highest level in nearly a month on Monday. The Bloomberg Dollar Spot Index rose by 0.6%, reaching its highest level since May 30th. Investors are concerned that the high oil prices may worsen inflation, leading the Federal Reserve to postpone interest rate cuts. The dollar rose by over 1% against the yen, and during the London trading session, reports of Israel launching a new round of attacks on key nuclear facilities in Iran further boosted the dollar's gains. Lee Hardman, senior forex strategist at Mitsubishi UFJ Financial Group, wrote in a research report, "Geo-political uncertainties are escalating, together with the risk of triggering a new energy price shock, which provides more support for the dollar in the short term, while the Fed's reluctance to restart the rate-cutting process is also a positive factor." The rapid escalation of the Middle East conflict has driven the dollar to rebound from a three-year low last week, recording its strongest weekly performance since late February. Options market signals indicate that there is still room for the dollar to rise in the near term - the one-month risk reversal index has climbed to its highest level since early April, highlighting the market's bullish sentiment towards the dollar. Jane Foley, head of forex strategy at Rabobank, said that the dollar has "regained its safe-haven status," which contrasts with its performance for most of this year. Previously, the dollar did not rise in response to concerns about US tariffs causing a global economic slowdown. Investors are closely watching whether Iran will take retaliatory measures against the US, such as disrupting shipping in the Strait of Hormuz, a major route for oil and natural gas transportation. Although global stock markets reacted moderately, Brent crude oil touched a five-month high on Monday. The rise in oil prices may increase inflation, making the Fed less willing to cut interest rates in the coming months to avoid stagflation, a situation where price increases and economic growth slowdown coexist. Due to these risks, US Treasury bond prices fell on Monday, with the yield on the 10-year Treasury rising by 3 basis points to 4.34%. Traders have also lowered their expectations for Fed rate cuts, with current pricing indicating that the Fed may accumulate a total of 48 basis points in rate cuts by the end of the year, slightly lower than the expectation of about 50 basis points at the end of last week. Gregory Hrur, Chief Investment Officer of Allianz Global Investors Multi-Asset, pointed out, "Even though the dollar initially strengthened after the attack, the long-term conflict and inflation pressures may complicate the Fed's policy stance." He added, "In the medium term, structural concerns such as the US twin deficits and weakened safe haven status may put pressure on the dollar."