Iran has presented a new proposal to the United States aimed at reopening the Strait of Hormuz and ending ongoing conflict, with the plan including a postponement of nuclear negotiations until after the US blockade of the Strait is lifted [1][2]. The proposal, delivered via Pakistani mediators, calls for an extension of the ceasefire to allow both countries to work toward a permanent resolution [2]. However, US President Donald Trump instructed Jared Kushner and Steve Witkoff to skip a planned trip to Pakistan, stating that Iran 'offered a lot, but not enough,' and Iranian President Masoud Pezeshkian asserted that Iran would not enter 'imposed negotiations under threats or blockade' [1][3].
The US Dollar Index (DXY) declined below 98.50, trading near 98.45 during Asian trading hours on Monday, as hopes for a US-Iran ceasefire and easing tensions in the Middle East weighed on the dollar [1]. The USD/CAD pair remained subdued for the second consecutive day, trading around 1.3660, as the Canadian Dollar benefited from higher oil prices [3]. West Texas Intermediate (WTI) crude oil prices rose, trading at $93.70 per barrel with a 0.33% daily gain [2], and around $94.00 per barrel according to another source [3], following a previous 2.4% loss. The increase in oil prices was attributed to supply concerns amid stalled US-Iran peace talks and restricted traffic through the Strait of Hormuz due to Iran's controls and the US naval blockade [3].
Market reactions were notable, with WTI oil prices advancing on supply concerns and the US Dollar extending losses despite increased safe-haven demand as the ceasefire comes under strain, particularly with escalating attacks between Israel and Hezbollah despite a US-brokered extension intended to halt fighting for three weeks [3]. Deutsche Bank analysts noted that a repricing of Federal Reserve policy toward a more hawkish stance, driven by persistent oil-related inflation, could potentially boost the DXY [1]. The Federal Reserve is expected to keep the federal funds rate between 3.50% and 3.75% at its upcoming meeting on Wednesday [1].
According to [1], the US Dollar's decline is linked to hopes for easing tensions, while [3] emphasizes that traffic through the Strait remains restricted, heightening fears of prolonged disruptions and supporting oil prices. There is a discrepancy regarding the progress of peace talks: [1] and [2] report Iran's proposal, while [3] highlights stalled negotiations and continued restrictions.
CONCLUSION
Iran's proposal to reopen the Strait of Hormuz has triggered declines in the US Dollar and gains in oil prices, with the Canadian Dollar also benefiting from higher crude prices. Market sentiment remains cautious as negotiations are stalled and supply concerns persist, while upcoming Federal Reserve decisions and ongoing Middle East tensions continue to influence currency and commodity markets.