HG MARKETS:

The U.S. dollar held firm on Wednesday, supported by heightened geopolitical tensions in the Middle East that fueled demand for traditional safe-haven assets. The greenback remained close to recent highs as investors reacted to concerns that the escalating conflict could drive energy prices higher and reignite global inflation pressures.

The U.S. Dollar Index, which measures the currency against a basket of six major peers, was slightly lower at 98.995 after earlier climbing to its strongest level since late November. Despite the modest pullback, the dollar’s resilience reflected ongoing market anxiety following coordinated U.S. and Israeli strikes on Iran over the weekend and Tehran’s subsequent retaliation. The confrontation has raised alarms about potential disruptions to oil shipments through the strategically vital Strait of Hormuz, a critical artery for global energy supplies.

Crude oil prices have surged sharply amid fears that prolonged instability in the region could restrict supply. Higher energy costs have, in turn, intensified concerns about renewed inflation worldwide. Market participants are closely monitoring whether oil prices may retreat if shipping routes remain open or are quickly restored, which could help ease inflationary pressures.

Another key focus for investors is the outlook for monetary policy. Analysts suggest that near-term market sentiment will depend not only on developments in energy markets but also on whether major central banks can afford to cut interest rates to support economic growth, or at least refrain from tightening policy further in response to inflation risks.

Economic data due on Wednesday include the monthly ADP employment report and the Federal Reserve’s Beige Book, both of which may offer insights ahead of the Federal Open Market Committee (FOMC) meeting scheduled for mid-March.