USD Surges as Trump Announces Iran Blockade, Oil Spikes Higher

The US dollar saw mixed but dramatic flows as President Trump announced a full naval blockade on Iran and imposed a 20% toll on Hormuz Strait shipping, sending WTI crude oil sharply higher. The geopolitical escalation dominated market sentiment, pushing US 2-year yields to their highest since February 2025 as traders priced in inflationary consequences of surging energy costs. Fed Governor Waller added to the hawkish tone, stating that forward guidance is inappropriate at this juncture and warning that another hot core inflation reading this week could force the Fed to consider rate hikes. On the fiscal side, the US June federal budget deficit came in at $120 billion, below the $138 billion expected, offering a minor positive offset. The combination of rising oil prices, hawkish Fed rhetoric, and geopolitical risk premium creates a complex backdrop for USD pairs. Safe-haven flows supported the dollar against risk-sensitive currencies while energy-importing nations' currencies face headwinds. Traders should brace for elevated volatility across all major pairs.