Oil Surges on US-Iran Tensions; USD/JPY and Commodity FX in Focus

Oil prices are consolidating near recent highs as escalating US-Iran tensions dominate market sentiment to start the new week. Traffic through the Strait of Hormuz has come to a halt following renewed confrontations, raising supply disruption fears that are supporting crude prices. Iran has reaffirmed it will not uphold its end of the nuclear deal as long as the US remains non-compliant, though mediators continue diplomatic efforts. The geopolitical risk premium is weighing on risk sentiment broadly, with safe-haven flows potentially benefiting JPY and CHF. On the monetary policy front, Fed's Williams signaled support for rate hikes if monthly core inflation consistently runs above 0.2% on average, reinforcing a hawkish bias for the dollar. Japan's chief cabinet secretary also made remarks, keeping USD/JPY traders alert. Traders should monitor oil price action closely, as sustained elevation could feed into inflation expectations and shift central bank rate path calculations. Key pairs to watch include USD/JPY, USD/CAD, and AUD/USD given their sensitivity to commodity and risk dynamics.