Safe-Haven USD and JPY Rally as Middle East Conflict Sparks Oil Surge

Widening conflict in the Middle East rattled global markets on Monday, triggering broad risk-off sentiment across all regions and asset classes. Crude oil prices surged sharply as the conflict showed no signs of abating, stoking dual fears of mounting inflation from higher energy costs and deteriorating global economic growth — a stagflationary scenario particularly negative for risk currencies. The US dollar and Japanese yen were the primary beneficiaries of safe-haven flows, with USD strengthening against the euro, British pound, Australian dollar, and Canadian dollar. The simultaneous surge in oil prices creates a complex dynamic for commodity currencies: while CAD typically benefits from higher oil, the overwhelming risk-off sentiment and fears of demand destruction are outweighing the positive terms-of-trade effect. AUD/USD and NZD/USD remain under heavy pressure given their sensitivity to global growth expectations. Support levels across major pairs are being tested, and traders should prepare for continued elevated volatility with wide spreads and potential liquidity gaps. Central bank responses to the energy-driven inflation spike will be crucial for medium-term forex direction.