The US Dollar rebounded sharply as President Donald Trump announced that US military operations against Iran would intensify and last for the next two to three weeks, dampening hopes for a near-term de-escalation in the Middle East conflict [1][2][3]. This announcement revived safe-haven demand for the Greenback, pushing the US Dollar Index (DXY) up 0.40% to 99.95, with the USD showing notable strength against major currencies, particularly the British Pound (+0.61%) and the Euro (+0.44%) [1][2][3]. EUR/USD slipped toward the 1.1540 zone, trading near 1.1537 at the time of writing, while GBP/USD fell toward 1.3230, pressured by USD strength and renewed concerns over the UK's exposure to higher imported energy costs [1][3].
Gold prices retreated by over 2%, with XAU/USD trading at $4,659 after sliding from a daily peak of $4,800, as the stronger US Dollar weighed on bullion and risk hopes faded [2]. Oil prices surged amid concerns over supply disruptions through the Strait of Hormuz, further fueling inflationary pressures and prompting traders to reassess monetary policy paths [1][3]. The Eurozone, more vulnerable to energy shocks due to its reliance on imports, faces heightened inflation risks, while the US is relatively insulated as a net exporter [3].
On the economic data front, US weekly Initial Jobless Claims fell to 202K from 211K, beating expectations of 212K and suggesting relative labor market stability [1][2]. The US trade deficit widened in February as imports rebounded, and Challenger Grey & Christmas reported 60.62K job layoffs in March, up more than 24% from 2025 figures [2]. The yield on the US 10-year Treasury note settled at around 4.311%, barely unchanged after an earlier drop [2].
Market participants are now focused on Friday’s US Nonfarm Payrolls report, expected at 60K, an improvement from February’s -92K drop, with the Unemployment Rate projected at 4.4% [2][3]. The swaps market has priced in the Federal Reserve holding rates unchanged throughout 2026, while traders expect two to three rate hikes from the European Central Bank (ECB) by year-end [2][3]. ECB policymaker François Villeroy de Galhau stated that the next move in key interest rates is “highly likely to be upwards,” citing sharply rising market inflation expectations [3]. Dallas Fed’s Lorie Logan emphasized that policy remains appropriately calibrated but cautioned that Middle East tensions are clouding the economic outlook [2].
Hostilities continued in the region, with explosions reported in Baghdad and Iran’s President Pezeshkian stating that Iran is not seeking to expand the scope of tension and war in the region [2]. Trump posted a video of a destroyed bridge in Iran, warning that more actions could follow unless a deal is reached [2].
CONCLUSION
President Trump's announcement of extended military operations against Iran has triggered a surge in the US Dollar, a drop in Gold prices, and a spike in Oil, reflecting heightened geopolitical risk and inflation concerns. Central banks are reassessing their policy paths, with the ECB likely to hike rates and the Fed expected to hold steady. Market attention now turns to upcoming US jobs data, which could further influence monetary policy and FX market direction.