USD Surges, AUD/USD and USD/CAD Jolted by US-Israel Strikes on Iran

Financial markets were rocked by US-Israel military strikes on Iran, triggering a sharp surge in the US dollar and crude oil prices while risk assets sold off aggressively. The S&P 500 dropped as risk aversion gripped markets, with the US dollar benefiting from safe-haven flows across multiple pairs. AUD/USD came under significant selling pressure as the risk-sensitive Australian dollar weakened on deteriorating global sentiment, while USD/CAD spiked higher before moderating as Canada's oil-linked economy received conflicting signals from surging crude prices versus risk-off positioning. AUD/CAD also experienced volatility as both commodity currencies reacted differently to the geopolitical shock. The initial market reaction reflected classic risk-off dynamics with the dollar, gold, and oil all strengthening simultaneously. Traders are now assessing whether the military action will escalate further or if diplomatic channels can de-escalate tensions. Near-term, USD strength is expected to persist as geopolitical risk premium remains elevated, with AUD/USD particularly vulnerable to further downside on any escalation.