Both Brent and U.S. crude had retreated from one-week highs hit earlier in the session, however, and gains in the dollar faded with oil prices

International News via Reuters:

The dollar eased from earlier highs on Monday and was on pace for a sixth straight daily decline after peace talks between the U.S. and Iran broke down, while the Hungarian forint rallied after the center-right Tisza Party defeated Viktor Orban in a landslide election victory.

U.S. crude rose 2.32% to $98.81 a barrel and Brent rose to $98.92 per barrel, up 3.91% on the day as the U.S. military began a blockade of ships leaving Iran’s ports, while Tehran threatened to retaliate against ports of its Gulf neighbors.

Both Brent and U.S. crude had retreated from one-week highs hit earlier in the session, however, and gains in the dollar faded with oil prices.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, shed 0.18% to 98.54, with the euro up 0.15% at $1.1737. The greenback is coming off its biggest weekly percentage drop since mid-January and the six-session run of declines would be its longest of the year.

“Given that we could be on the verge of a major escalation, I’d say the market is showing a lot of restraint,” said Marc Chandler, chief market strategist at Bannockburn Capital Markets in New York.

The risk-sensitive Australian dollar strengthened 0.44% versus the greenback to $0.7091 and the New Zealand dollar was up 0.53% to $0.5864.

RISING CRUDE PRICES TRIGGER ECONOMIC CONCERNS

The war in the Middle East has pushed crude prices up about 40% since the end of February, when the fighting began, heightening concerns about higher inflation and lower global growth, also known as stagflation.

Chicago Federal Reserve President Austan Goolsbee said oil futures markets are pricing in an expectation the surge in oil prices related to the Iran war will be short-lived, and that as long as this is the case, the impact on the U.S. economy may be limited.

The dollar has tended to climb when tensions between Iran and the U.S. have risen, given its status as a safe haven and the relative insulation of the U.S. to imported energy-price inflation.

Against the Norwegian krone,, the dollar weakened 0.73% to 9.456 and the Canadian dollar strengthened 0.28% versus the greenback to C$1.379 per dollar, with both currencies sensitive to movements in crude prices.

“Beneath the surface, today’s price action looks less risk-led and more driven by relative terms of trade shifts,” said Goldman Sachs analyst Teresa Alves in a note.

HUNGARIAN FORINT RISES

The Hungarian forint surged after veteran nationalist leader Viktor Orban lost power to Peter Magyar’s Tisza Party in Sunday’s national election after 16 years in office.

The currency jumped 3.69% versus the dollar at 308.81 after touching 308.57, its strongest level since February 2022.

“The polls showed Orban was going to lose, that he actually did lose and conceded is a good sign, but this is not like a shift to some kind of left position,” said Chandler.

YEN WEAKENS

Against the yen, the U.S. dollar was up 0.28% to 159.74 as yields on Japan’s benchmark 10-year government bonds advanced 3.2 basis points to 2.496%, the highest in nearly three decades.

Bank of Japan Governor Kazuo Ueda said on Monday that economic and price developments were moving roughly in line with the bank’s forecasts, but called for vigilance over the impact of the conflict in the Middle East.

Reporting by Chuck Mikolajczak; additional reporting by Gregor Stuart Hunter in Singapore and Samuel Indyk in London; Editing by Kirsten Donovan, Hugh Lawson, Ros Russell, Rod Nickel