USD/JPY Surges to 160 on Iran Strike Fallout and Inflation Fears

USD/JPY hit the psychologically significant 160.00 level on Friday as confirmed US and Israeli strikes on Iran's Khondab facility at the Arak nuclear site sent shockwaves through global markets. The pair's sharp rally reflects surging US Treasury yields driven by spiking oil prices and intensifying inflation expectations, which are repricing Federal Reserve rate path assumptions toward a more hawkish stance. Despite the yen's traditional safe-haven status, the widening US-Japan yield differential overwhelmed haven demand, propelling the dollar higher against the Japanese currency. The Bank of Japan faces a dilemma as imported inflation via energy costs rises while domestic economic conditions remain fragile. Key resistance now sits at the 160.50 area, with a break above potentially targeting 162.00, the multi-decade highs from 2024. Support is seen at 158.50. Traders should remain vigilant for potential Japanese Ministry of Finance intervention rhetoric, as the 160 level has historically triggered verbal and actual intervention. Volatility is expected to remain elevated as geopolitical developments unfold rapidly.