Dollar bounces back as Iran blocks key oil route
The US dollar ticked up to 99.53 on Monday, bouncing back as tensions rise between the US and Iran over the blocked Strait of Hormuz, a key route for global oil and gas.
About 20% of global oil flows transit the Strait of Hormuz and those flows are at significant risk from current disruptions.
Investors are flocking to safer bets like the dollar.
Oil prices could go even higher
This blockade is making energy way pricier worldwide—oil is close to $90 a barrel and could go even higher.
Shipping costs have jumped, war-risk insurance premiums for transits have roughly doubled (from about 0.25% to over 0.5% of vessel value per transit), and Asian utilities and some European sectors are being affected by higher prices for refined products such as diesel.
If you're watching fuel prices or care about how global drama hits your wallet, this is one to keep an eye on.
Iran has threatened to strike back
Iran has tightened control over the strait with drones, and there are reports or intelligence indications it has deployed or prepared to deploy naval mines, actions that have reduced tanker traffic through the strait.
The US isn't backing down either: President Donald Trump threatened to strike Iran's electricity grid if things escalate further, while Iran warned it could target nearby infrastructure in response.
All this uncertainty is pushing energy importers' currencies down against the dollar, while exporters like Norway and Russia are cashing in.