The dollar slipped on Monday after the U.S. Supreme Court’s decision to strike down President Donald Trump’s tariffs stirred fresh policy uncertainty, further fuelled by worries about a conflict with Iran.

The euro was up 0.2% against the dollar, to $1.1808, while sterling rose 0.3% to $1.3519. The greenback also weakened 0.2% against the Japanese yen to 154.745 yen.

"These initial moves appear to be knee-jerk reactions to headlines rather than true signals of fundamental change in the global economic landscape," said Invesco’s chief global market strategist Brian Levitt.

"The markets’ initial reaction to the ruling may ultimately be short-lived, given that multiple avenues can be pursued to keep tariffs in place."

The Supreme Court ruled on Friday that Trump had exceeded his authority in imposing sweeping tariffs, prompting him to lash out at the court and announce a blanket 15% levy on imports.

He also insisted that higher-tariff deals with trade partners should stay.

The uncertainty could complicate an already unsettled backdrop for forex markets, at a time when traders are dealing with shifting interest rate expectations and geopolitical jitters.

Trump’s replacement levies will run for 150 days and it is not clear if the U.S. owes importers refunds on duties already paid. The Supreme Court did not rule on that issue.

Analysts expect years of litigation and another bout of activity-crimping confusion while Trump seeks other means to replace the global tariffs more permanently.

The European Commission demanded on Sunday that the U.S. stick to a deal reached last year with the EU, which includes zero tariffs on some products such as aircraft and spare parts.

U.S. trading partners in Asia were weighing the fresh uncertainties, as were investors who have already been wrong-footed by markets’ responses to Trump’s trade levies - which have incidentally failed to close the U.S. trade deficit.

INVESTORS EYEING MIDDLE EAST TENSIONS

The risk of a military conflict between the U.S. and Iran has added another layer of ambiguity to financial markets.

While the longtime adversaries are scheduled to hold a third round of talks on Thursday on their nuclear dispute, Trump has ordered a huge buildup of forces in the Middle East.

"Escalating tensions in the Middle East have revived questions about geopolitical hedges and the FX impacts of a commodity price shock," Goldman Sachs analysts wrote.

Iran is among the world’s top oil producers, and any strikes on it are likely to ripple across the crude markets. A potential conflict might also disrupt shipping routes as Tehran has previously threatened to shut the Strait of Hormuz, which carries a fifth of global oil flows.

Goldman analysts said the Swiss franc was their preferred inflation hedge. The franc was up 0.3% at 0.7736 francs per dollar.