FX.co ★ Dollar Set for Best Month Since July 2025

The dollar index has risen nearly 3% this month, touching 100 and putting the currency on track for its strongest monthly performance since July 2025. The escalating conflict in the Middle East, now in its fifth week, has roiled energy markets, darkened the global economic outlook, and triggered a flight to the world’s leading reserve currency. With Tehran effectively blocking the Strait of Hormuz and threatening shipping in the Red Sea, global energy prices have jumped, reinforcing support for the dollar as the US remains the world’s largest oil producer. The greenback’s gains are further underpinned by fading expectations of Federal Reserve rate cuts this year, as renewed inflation concerns take hold—despite Fed Chair Jerome Powell’s insistence that long-term US inflation expectations remain well anchored. Powell noted that the central bank’s current policy stance gives it room to gauge the economic impact of the Iran war, but traders have turned markedly more cautious.