The U.S. dollar tread water on Tuesday as investors assessed a flare-up in tensions in the Iran war, while the yen was muted after possible Japanese government intervention helped spur a jump in the currency last week.

By 06:44 ET (10:44 GMT), the U.S. dollar index, which tracks the greenback against a rival currency peers, had inched up by 0.1% to 98.48.

Meanwhile, the euro was mostly unchanged at $1.1689, while the British pound had ticked up by 0.1% to $1.3543.

Writing in a note to clients, analysts at ING said investors will be focused today on data showing April services sector activity and "whether selling price expectations are picking up." Should that be the case, the Federal Reserve may be dragged more towards the price stability side of its mandate, which would imply a tilt to a more restrictive policy stance.

The other pillar of the Fed’s mandate, employment, will step into the spotlight later this week when fresh monthly labor market figures are set to be released.

Hormuz tensions intensify

Hovering in the background were ongoing developments in the Middle East. Traders were noting indications that a U.S. operation to escort some ships through the strait may be loosening Iran’s stranglehold over the area.

In particular, a statement from shipping giant Maersk said a U.S.-flagged vehicle carrier operated by one of its subsidiaries had exited the Gulf via the waterway with the assistance of American military support.

But it was far from clear whether the U.S. effort was leading to a sustained reopening of the strait, a conduit for roughly a fifth of the world’s oil and liquefied natural gas which has been effectively shuttered during the more than two-month old Iran war.

U.S. and Iranian forces launched fresh attacks in the Gulf on Monday as both sides sought to assert control over the strategic waterway.

The attacks rattled an already shaky ceasefire and heightened fears of prolonged energy supply disruptions which have driven up oil prices and sparked worries over an inflationary spike. Tensions ratcheted up further after Iranian strikes reportedly targeted infrastructure in the United Arab Emirates, including an oil terminal in the port city of Fujairah.

Investors have turned to the U.S. dollar as a safe haven throughout the conflict, enticed in part by the view that the American economy -- as a major energy exporter -- was relatively immune to an Iran-linked energy shock.

"Unless there are clear signs of moves towards sustainable peace in the Gulf – and there is some focus that President Trump wants a deal before his trip to China on 14/15 May – we suspect high oil prices can keep short-dated U.S. rates and the dollar bid," the ING analysts said.

Eyes on the yen

Beyond the war, the Japanese yen last stood at 157.73 per U.S. dollar, not straying too far from its strongest level against the greenback in two months.

Last week, the yen spiked versus the dollar by around 1.5%, its biggest weekly increase since February.

Market participants now widely believe that officials in Tokyo intervened in currency markets last Thursday, with the aim of keeping the dollar-yen pair under 160 this year, analysts have suggested.

According to sources cited by Reuters, Japanese authorities did partake in yen-buying activity for the first time in two years.

Reuters added that money market data from Friday suggested that Tokyo may have shelled out as much as 5.48 trillion yen ($35 billion) in yen purchases last week.

Elsewhere, the Australian dollar, a proxy for risk sentiment, inched down after the Reserve Bank of Australia lifted interest rates as anticipated for a third consecutive meeting. The RBA also hiked its inflation projections and downgraded its economic growth outlook.

 Oil prices jumped in premarket U.S. trade on Monday after Iranian media reported that two missiles had struck a U.S. warship in the Strait of Hormuz, heightening fears of further escalation in the region.

The move in oil price was later tempered after a senior U.S. official denied the claim, according to Axios journalist Barak Ravid.

Earlier today, oil prices were also pressured by the Organization of Petroleum Exporting Countries and allies voting to increase its production quotas, in the face of increasing supply disruptions due to the U.S.-Israel war on Iran. 

Elsewhere, Ukrainian drone attacks on a Russian port and other energy infrastructure also pushed up concerns over supply disruptions. 

Brent oil futures for July rose 3.3% to $111.79 a barrel by 06:47 ET (10:47 GMT), while West Texas Intermediate crude futures was up 2.9% to $104.87 a barrel. Brent crude rose to as much as $114.29 on the news before paring gains.

Trump says US to aid stranded ships in Hormuz

Trump said on Sunday the U.S. would begin an effort from Monday to guide ships stranded in the Strait of Hormuz, aimed at aiding neutral countries in the U.S.-Israel war on Iran. 

He provided few actual details on the plan, but said his representatives were “having very positive discussions” with Iran. 

Separately, U.S. Central Command said support would include destroyers, over 100 land and sea aircraft, and 15,000 service members. It was not immediately clear whether the plan would involve direct military action. 

Traffic through the Strait of Hormuz remained disrupted after Iran effectively blocked the waterway in late-February. The channel supplies about 20% of the world’s oil production. 

Iran has vowed to keep Hormuz closed until the U.S. lifts its naval blockade against the country. Washington has insisted that Iran first open the channel and agree to a nuclear deal, leaving both countries at an impasse. 

Ukraine attacks Russian port, tankers 

Concerns over oil supply disruptions extended beyond the Middle East, after Ukraine launched a wave of drone attacks on targets across Russia on Sunday.

Ukraine struck the Baltic Sea port of Primorsk, while also attacking a number of vessels and energy infrastructure in the area. 

Ukraine has repeatedly targeted Russian oil infrastructure as a means of cutting off Moscow’s revenue stream and limiting its war efforts. 

Elsewhere, the OPEC+ said on Sunday they will increase oil production by 188,000 barrels per day in June. This comes after the United Arab Emirates left the producer group on May 1. 

U.S. President Donald Trump is set to receive a briefing more potential military action in Iran on Thursday, Axios reported, citing two sources with knowledge of the matter.

The briefing indicates that Trump is seriously considering resuming major military operations against Iran to break a deadlock with Tehran over the past two weeks, the Axios reported late-Wednesday. 

U.S. Central Command leader Admiral Brad Cooper is set to brief Trump on potential options, which include plans for a wave of attacks on Iran -- likely including infrastructure targets -- to break the deadlock, the report said.

Such a move is likely to end an indefinite ceasefire between the U.S. and Iran, with attempts at peace talks having largely fallen flat in recent weeks. 

Plans for more strikes are intended to either further coax Iran towards a deal, or to strike a finishing blow before ending the war, the Axios said. 

The hope is for Iran to return to the negotiating table with more flexibility on its nuclear issues, the report said. This came after Iran presented a proposal to reopen the Strait of Hormuz and end the war, while shelving discussions on its nuclear plans. 

The proposal was received poorly by Trump, with Iran’s nuclear activities remaining a key point of contention. 

Other options that Trump will be briefed on include a special forces operation to secure Iran’s uranium stockpile, or to take over part of the Strait of Hormuz by force and reopen it for commercial shipping, the Axios report said. Both operations could include ground forces. 

The U.S. has largely maintained its naval blockade of Iran, with Trump having viewed the move a major source of pressure on Tehran to accept a deal.

But Tehran has largely called for an ending of the blockade before more peace talks can be held. The country has also effectively blocked the Strait of Hormuz for much of the roughly two months since the onset of the war. 

Brent crude futures, the global benchmark, briefly surged to their highest intraday level since the beginning of the conflict in late February following the Axios report, but later gave those gains. Stocks in Asia and Europe were volatile.

White House seeking international help to reopen Hormuz - WSJ 

The Trump administration is seeking to build a new international coalition to restore shipping through the Strait of Hormuz as traffic through the vital waterway remains stalled, the Wall Street Journal reported on Wednesday.

Citing an internal State Department cable, the report said U.S. diplomats have been instructed to press foreign governments to join a proposed “Maritime Freedom Construct,” aimed at enabling safe navigation and coordinating responses to disruptions.

The initiative would involve information-sharing, diplomatic coordination, and sanctions enforcement, according to the cable, and could include both diplomatic and military participation.

The effort comes as tensions with Iran continue to disrupt traffic, with Tehran accused of targeting vessels and the U.S. maintaining a sweeping blockade on ships linked to Iranian ports.

The Strait of Hormuz has become a central issue in stalled U.S.-Iran talks. The effective shuttering of a narrow chokepoint for a fifth of the world’s oil has raised concerns over global energy supplies and oil prices.

The Wall Street Journal said the push signals Washington’s desire to involve allies more directly, even as Trump has previously criticised partners, particularly in Europe, for not doing enough to secure the waterway.

The dollar steadied in Asian trade on Wednesday with focus squarely on a Federal Reserve meeting later in the day, while the Australian dollar weakened after consumer inflation data for March showed a slightly smaller than expected spike. 

Broader Asian currencies largely retreated as sentiment remained frayed in the face of little progress towards U.S.-Iran peace talks, while anticipation of the Fed meeting also spurred flows into the dollar. 

Regional trade was dulled by a market holiday in Japan, with the yen weakening slightly. 

Dollar steady as Fed decision looms 

The dollar index and dollar index futures steadied in Asian trade, retaining some of their recent gains.

The greenback remained upbeat before the conclusion of a two-day Fed meeting later in the day, where the central bank is widely expected to leave interest rates unchanged. 

Focus will be squarely on the Fed’s outlook for inflation and rates, especially following a series of hawkish signals from other central banks on the inflationary impact of the Iran war.

Wednesday’s meeting is also expected to be the last under Fed Chair Jerome Powell, whose term ends on May 15. A major hurdle for Fed Chair nominee Kevin Warsh was cleared last week after Republican Senator Thom Tillis reversed his opposition of Warsh’s appointment, paving the way for a Congressional vote. 

Australian dollar falls after March CPI reads slightly below expectations 

The Australian dollar’s AUD/USD pair fell 0.25% after consumer price index inflation data for March and the first quarter read a touch below expectations.

But the data still showed a sharp increase in inflation over the past month, driven chiefly by higher fuel costs stemming from the Iran war. 

Core inflation also read a touch below expectations, remained steady and above the Reserve Bank of Australia’s 2% to 3% annual target. 

While the data did not show inflation rising as much as markets had feared, it still pointed to more interest rate hikes by the RBA. The central bank hiked rates by a cumulative 50 basis points in 2026, and warned of more such moves in the face of a fuel-driven increase in inflation. 

ANZ analysts said that despite the softer-than-expected CPI print, they still expect another 25 bps hike by the RBA at its May meeting. 

Asia FX muted as Iran uncertainty, Hormuz disruptions persist 

Broader Asian currencies largely retreated on Wednesday, as risk appetite remained weak due to a continued impasse in the U.S.-Iran war. Reports showed U.S. President Donald Trump telling his aides to prepare for an extended blockade in the Strait of Hormuz– a move that points to little immediate relief for markets. 

A market holiday in Japan also kept regional trading volumes low. The yen’s USD/JPY pair rose slightly and remained close to the 160 yen level, even after the Bank of Japan held interest rates and struck a hawkish chord on Tuesday.

The Chinese yuan’s USD/CNY pair was flat, while the South Korean won’s USD/KRW pair rose 0.3%. Chinese purchasing managers index data for April is also due in the coming days. 

The Indian rupee’s USD/INR pair rose 0.3% and came closer to breaking above 95 rupees, although traders remained wary of any further intervention by the Reserve Bank. 

The Singapore dollar’s USD/SGD pair was flat, while the Taiwan dollar’s USD/TWD pair rose 0.1%.

Gold prices sank to a three-week low on Tuesday, as the U.S. dollar firmed and oil prices climbed with investors eyeing a crush of central bank interest rate decisions this week.

By 05:41 ET (09:41 GMT), spot gold had dropped by 1.5% to $4,610.31 an ounce and gold futures had declined by 1.5% to $4,624.06 an ounce.

A tracker of the U.S. dollar against a basket of currency peers strengthened, making bullion more expensive for overseas buyers. The greenback has been floating just above pre-war levels, as traders view it as a relative safe-haven amid geopolitical strife and suggest that the U.S.’s status a major energy exporter will help insulate it from war-linked energy shocks.

Also weighing on the yellow metal was a fresh increase in oil prices following media reports that U.S. President Donald Trump was unhappy with Iran’s latest proposal to end their two-month war and reopen the Strait of Hormuz.

Tehran proposed delaying negotiations over its nuclear program, although Trump has stated that eradicating these ambitions were a central reason for starting his joint campaign with Israel in late February.

The impasse means that, for the moment, the Strait of Hormuz will remain all but shuttered to shipping traffic, further placing upward pressure on oil prices. Roughly a fifth of the world’s crude flows through the narrow waterway off Iran’s southern coast.

Worries have abounded that the jump in oil prices will, in turn, fuel a surge in inflation that could cause central banks to consider interest rate hikes. This may not bode well for bullion, which tends to perform poorly in low-rate environments.

Central bank decisions in focus

A bevy of central banks are unveiling new rate announcements this week, possibly offering insight into how the oil price spike could impact borrowing costs in countries around the world.

The Bank of Japan left interest rates unchanged on Tuesday, but warned of cooling economic growth and rising inflation due to the impact of the war in the Middle East.

As widely anticipated, the BOJ left its short-term policy rate at 0.75%.

However, the decision was not unanimous, with three of the bank’s nine-member rate-setting board arguing for higher interest rates due to rising inflationary risks. It was the biggest number of dissents since January 2016, when the BOJ adopted negative interest rates.

The central bank flagged that “[g]iven that underlying inflation has been approaching 2% and real interest rates are at significantly low levels," it will "continue to raise its policy rate in response to developments in the economy, prices and financial conditions.”

In a note, analysts at Capital Economics said: "While the Bank of Japan left interest rates unchanged today, its Outlook report was hawkish and we’re sticking to our forecast that the Bank will hike rates in June." 

Later this week, the Federal Reserve, the European Central Bank, and Bank of England will announce new rate decisions.

Oil prices rose on Monday, as negotiations between the U.S. and Iran appeared to be stalled, leaving constraints on crude supply flows through the Strait of Hormuz in place.

Brent oil futures, the global benchmark, rose 2.5% to $107.92 a barrel by 05:55 ET (09:55 GMT), while U.S. West Texas Intermediate crude futures rose 2.1% to $96.38 a barrel.

However, investors were keeping tabs on media reports that Iran has offered the U.S. a new proposal to reopen the Strait of Hormuz and end the war. The offer, which was first reported by Axios, also proposes postponing discussions over Iran nuclear program to a later date. 

This point that is likely to draw objections from Washington, which has made Iran handing over its uranium and ceasing all nuclear activities major demands. Tehran has largely rejected these, although the status of Iran’s nuclear program, after debilitating U.S. strikes in mid-2025, remains uncertain. 

The U.S. has repeatedly called for a reopening of Strait of Hormuz before any major peace talks can take place. Iran has in turn called for the lifting of a U.S. naval blockade of Iranian ports.

U.S.-Iran talks fall through, Hormuz disruptions remain

U.S. President Donald Trump cancelled a planned trip by U.S. officials to Pakistan for talks on Iran over the weekend, shortly after Iranian officials left Islamabad.  The two sides have remained at odds, even after Trump indefinitely extended a ceasefire with Iran earlier in April. 

Oil flows through the Strait of Hormuz, a major shipping channel for energy markets, showed few signs of improving over the weekend. Adding to concerns over tighter oil supplies, U.S. Treasury Secretary Scott Bessent said the U.S. did not plan to renew a waiver allowing the purchase of Russian and Iranian oil currently at sea. 

Washington had briefly allowed the purchases to offset some supply disruptions stemming from the Iran war. 

Iran has effectively blocked the Strait of Hormuz since late-February in response to joint U.S.-Israeli attacks, threatening to cut off roughly 20% of the world’s crude supply. 

The U.S. dollar was on pace for its first weekly gain in three weeks on Friday, as a standoff between the U.S. and Iran maintained safe-haven demand for the currency.

By 05:49 ET (09:49 GMT), the U.S. dollar index, which tracks the greenback against a basket of rival currencies, was broadly unchanged at 98.80. The euro was also flat against the dollar at $1.1686, while the British pound had edged up by 0.1% to $1.3483.

Investors have been coming to the U.S. dollar as a relative bastion, attracted in part by the U.S.’s status as a major energy exporter, which could help insulate the country from an energy shock caused by the effective closure of the Strait of Hormuz. 

Markets feared that a swift resolution to the Iran conflict appeared unlikely. While the U.S. did indefinitely extend a ceasefire with Iran this week, Tehran continued to attack ships in the Strait of Hormuz, while Washington has seized vessels attempting to run its naval blockade in the region.

U.S. President Donald Trump said on Thursday he was in no rush to end the war, even as Israel and Lebanon agreed to prolong their ceasefire by three weeks. 

Meanwhile, most Asian currencies weakened. The Japanese yen, in particular, fell. New data showed consumer inflation in Japan picked up more than expected in March, but markets remained convinced that the Bank of Japan is not likely to raise interest rates at a meeting next Tuesday. 

Uncertainty surrounded the future of potential peace talks between the U.S. and Iran on Thursday, as tensions around the Strait of Hormuz persisted despite President Donald Trump’s announcement of an extended ceasefire earlier this week.

Tehran attacked three ships in the Strait of Hormuz on Wednesday, seizing two of them. Iranian officials said the move was in response to an American blockade of the country’s ports, as well as the recent seizure of an Iranian-flagged ship.

A day earlier, Trump announced in a social media post that a two-week ceasefire deal with Iran had been extended just hours before it was due to expire. He said the extension came at the request of Pakistan, which has served as a mediator between Washington and Tehran, adding that the truce would be in effect "until such time as" Iranian officials present a "unified proposal" for peace.

However, leaders from both sides have indicated that they stand ready to resume hostilities.

Mediators from Pakistan, Turkey and Egypt were racing to salvage peace talks between the U.S. and Iran, including arranging a potential meeting as soon as Friday, the Wall Street Journal reported, citing officials familiar with the matter.

The U.S. and Iran were exchanging messages via third parties, although little progress has been made, the WSJ said.

Speaking to Fox News on Wednesday, Trump suggested that there was "no time pressure" on staging a fresh round of talks or on the ceasefire. White House Press Secretary Karoline Leavitt also said Trump does not view Iran’s ship seizures as a violation of the pause in fighting.

A trip to Pakistan by U.S. Vice President JD Vance, who led a prior American delegation in talks with Tehran, has been put on hold. According to the Associated Press, Pakistani Interior Minister Mohsin Naqvi hoped for "positive progress" with Iran after meeting with U.S. Chargé d’Affaires Natalie Baker.

Yet Tehran has stressed that it will not participate in any negotiations as long as the American blockade is in effect, the WSJ reported.

Oil back above $100

With signs pointing to persistent oil supply disruptions through the Strait of Hormuz, a crucial shipping conduit for a fifth of the world’s oil, crude prices once again topped $100 a barrel. Brent crude futures, the global oil benchmark, were last higher by 1.8% at $103.70 a barrel.

Although oil prices have eased back from an initial spike after the start of the war in late February, they are still well above pre-conflict levels. Worries have abounded that the energy shock could trigger a spike in inflationary pressures and a slowdown in global growth.

Military planners from over 30 countries are due to continue a meeting in London later today aimed at finding a way to unblock the Strait of Hormuz, where the threat of attacks has caused tanker traffic through the narrow chokepoint to all but stop.

Despite uncertainty surrounding the Federal Reserve's leadership transition, UBS believes the U.S. central bank remains on track to cut interest rates later this year, with cooling inflation and labor market softness clearing the path for further easing.

Kevin Warsh, President Trump's nominee to replace Fed Chair Jerome Powell when his term expires next month, appeared before the Senate Banking Committee on Tuesday, reaffirming his commitment to monetary policy independence. 

Warsh pushed back on suggestions he would act as a proxy for the White House, and called for a "regime change" in the Fed's approach, including a new inflation framework and more internal debate. He also indicated he may not continue holding a press conference after every FOMC meeting, saying "truth-seeking is more important than repetition."

On inflation, UBS notes that March price data showed underlying inflation was milder than markets had expected. The firm's view is that "cooling sequential core inflation in the coming months amid fading tariff effects should open the door to further rate cuts by the US central bank."

Labor market conditions add to the case for easing. UBS points to lower average weekly hours and decelerating wage growth as signs of demand-side weakness, warning that a further fall in labor demand could push the unemployment rate sharply higher.

“With the composition of the Fed board likely to become more dovish later this year, and a large majority of policymakers still favoring returning the policy rate closer to 3%, we believe the current market pricing of Fed policy is too hawkish,” UBS stated.

The firm maintains its call for an additional 50 basis points of cuts toward year-end, adding that "further easing should support equities and high-quality bonds over the medium term."

Gold prices dropped on Tuesday, weighed down by a firmer U.S. dollar, as investors assessed uncertainty around Middle East peace talks and awaited a key Congressional confirmation hearing with Federal Reserve Chair nominee Kevin Warsh.

By 06:15 ET (10:15 GMT), spot gold had slid by 0.8% to $4,782.74 an ounce, while gold futures had fallen by 0.6% to $4,802.49 an ounce.

Denting the appeal of gold was a strengthening in the dollar, which can make bullion more expensive for overseas buyers. A tracker of the greenback against a basket of currency peers was last higher by 0.2%, as cautious traders flocked to the dollar, which some have argued presents a safe-haven thanks partially to the belief that heavy U.S. energy exports will help insulate the country from Iran-linked oil shocks.

Also weighing on the yellow metal were oil prices, which are hovering well above pre-war levels due in large part to a weekslong closure of the Strait of Hormuz, a vital conduit for a fifth of the world’s oil. The effective shuttering of the waterway was reinstated over the weekend, despite having been temporarily reopened to commercial shipping traffic on Friday.

The jump in oil prices has fueled fears that a bout of inflationary pressures could hit countries around the world, potentially leading central banks to hike interest rates. This could bode poorly for non-yielding assets like gold, which tend to underperform in elevated rate environments.

U.S.-Iran peace talks in question

Uncertainty surrounded the prospect of fresh peace talks between the U.S. and Iran on Tuesday, with both sides presenting conflicting signals ahead of the fast-approaching expiration of a temporary ceasefire deal.

The pause to the fighting is set to run out later this week, although the exact timing of the deadline remained unspecified. U.S. President Donald Trump announced the two-week ceasefire on April 7 at 6:32 p.m. ET (22:32 GMT).

Citing a Pakistani source, Reuters reported that the halt to hostilities would end at 8 p.m. Eastern time on Wednesday, or midnight GMT on Thursday.

With the clock ticking down, Pakistan, which has served as a frequent mediator between Washington and Tehran, has been moving to clear the path for renewed talks to resolve a conflict which began with joint U.S. and Israel strikes on Iran in late February.

Warsh set for Senate confirmation hearing 

Beyond the Iran war, investors are eyeing the confirmation hearing of Kevin Warsh, Trump’s pick to become the next Fed Chair. The Fed’s independence from Trump – who has constantly demanded lower interest rates – will be of particular interest for Wall Street.

Warsh will testify before the Senate Banking Committee at 10:00 ET (14:00 GMT).

His nomination has been viewed as less dovish than markets were expecting. While Warsh has expressed support for Trump’s demands for lower rates, he has in the past criticized the Fed’s asset buying activities, and has called for a leaner balance sheet.

Gold and other precious metals plummeted from record highs following Warsh’s nomination in late-January. In prepared remarks for the hearing cited by media reports, Warsh emphasized the Fed’s independence from political influence, but also noted that the bank should remain focused on its primary goals.

His confirmation as Fed Chair is likely to be delayed even as incumbent Chair Jerome Powell’s term ends in May. Several top lawmakers have called for Powell to stay on until the Trump administration drops an investigation into Powell and the Fed over allegations of corruption in a renovation project. The probe was widely criticized as an attempt to coerce the central bank.