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MUFG's Senior Currency Analyst Lee Hardman highlights a sustained bullish breakout in the US Dollar Index above the 96.000–100.00 range, driven by surging oil prices following the effective closure of the Strait of Hormuz. The Strait of Hormuz, a critical global oil transit route, has seen heightened geopolitical tensions, pushing crude prices to multi-year highs. This energy-driven inflationary pressure is reinforcing demand for the USD as a safe-haven asset, with analysts noting the breakout is supported by technical indicators and sustained momentum. The USD's strength has significant implications for global markets. Higher oil prices increase input costs for economies reliant on energy imports, potentially spurring inflation and central bank tightening. Traders are closely monitoring the USD's ability to hold above key resistance levels, as a sustained breakout could trigger further gains against major currencies like the EUR and JPY. Emerging market currencies, particularly those in energy-dependent economies, face added pressure from the USD's rally. For MENA investors, the USD's trajectory is critical given the region's reliance on oil exports and USD-denominated debt. The ongoing geopolitical risks in the Gulf could prolong energy volatility, keeping the USD in a strong position. Key watchpoints include OPEC+ production decisions, US Federal Reserve policy signals, and any escalation in regional tensions. The USD Index's next target is 105.00, with a breakdown below 100.00 signaling potential weakness.
