Failure to extend the US-Iran truce may lift the dollar as energy inflation risks prompt Fed hawkishness, analysts warn.
The US dollar could strengthen further if negotiations between Washington and Tehran collapse, according to analysts. A prolonged conflict may keep energy prices elevated, fueling inflation and pushing Federal Reserve officials toward a more hawkish stance. This shift could lift US Treasury yields, supporting the dollar.
The dollar index currently trades near 99, down 0.3% on Thursday after reports of a tentative 60-day truce extension. However, the deal remains unconfirmed by Iran and lacks approval from President Trump. Key sticking points include Iran’s nuclear program, particularly its uranium stockpile and enrichment rights.
Recent PCE data showed April headline inflation rising at its fastest pace in three years, driven by energy costs. Analysts argue this trend could reinforce Fed concerns over price stability, outweighing growth considerations.