USD Surges, Oil Spikes as US-Iran Military Conflict Escalates

Safe-haven flows dominated Asia-Pacific forex markets as a dramatic escalation in US-Iran military hostilities sent shockwaves through global risk assets. The conflict intensified with the US launching three successive waves of strikes targeting Iranian positions near the Strait of Hormuz, followed by Iranian retaliatory strikes on US military bases in Jordan, Kuwait, and Bahrain, including the US Fifth Fleet headquarters. Oil prices surged sharply on fears of supply disruption through the critical Hormuz chokepoint, through which approximately 20% of global oil supply transits. The USD/JPY pair likely faced downward pressure as the Japanese yen attracted safe-haven demand, while commodity-linked currencies such as AUD and NZD faced selling pressure amid the risk-off environment. The Canadian dollar may find mixed support given its oil-linked nature versus the broader risk aversion. Traders should anticipate extreme volatility across all major pairs, with widened spreads and potential liquidity gaps. Gold is expected to benefit significantly from the geopolitical turmoil. Near-term market direction remains contingent on whether hostilities de-escalate or expand further across the region.