Dollar Dips as Iran Strike Pause Eases Supply Fears

The dollar fell against major currencies Monday after U.S. President Donald Trump announced a delay in potential military strikes against Iran, easing concerns about supply shocks and boosting risk assets. Trump stated he had directed the Department of Defense to postpone “any and all” military actions against Iranian power plants and energy infrastructure for five days.

Dollar Weakens Following Trump’s Iran Announcement

Trump’s announcement, made on Truth Social, came hours before a self-imposed deadline for Tehran to “fully open” the Strait of Hormuz, after threatening to destroy Iranian power plants. Iran’s foreign ministry subsequently denied reports of talks and affirmed its conditions for ending the conflict remain unchanged.

“Everything seems so fleshed out that I think the market is having a hard time believing it’s complete fiction,” said Steven Englander, head of global G10 FX research and North America macro strategy at Standard Chartered in New York. “Whether they are close to a deal as Trump laid out is a different story, but I think the market is going with the idea that there has been some sort of communication going on.”

The euro rose 0.4 percent to $1.1616 in afternoon trading, reaching its highest point since March 11. The dollar was 0.6 percent weaker against the yen, trading at 158.30 yen, slightly retreating from the 160 yen level that could trigger intervention from the Bank of Japan. Sterling increased by 0.71 percent to $1.3436, its highest level since March 10.

The dollar index, measuring the U.S. currency against a basket of peers, was down 0.4 percent at 99.08. The index had previously recorded its first weekly decline since the start of the conflict on Friday, influenced by rising oil prices and central bank responses.

Global stock and energy markets also saw sharp recoveries following Trump’s comments. U.S. Treasury yields also retreated from multi-month highs.

According to a reporter for Axios, Trump’s special envoy Steve Witkoff and Iranian Foreign Minister Abbas Araghchi met separately with representatives from Turkey, Egypt, and Pakistan. Iran’s foreign ministry acknowledged “initiatives” to reduce tensions, as reported by the Mehr News Agency.

Brent crude oil, the benchmark, fell around 12 percent to $98.65 a barrel, after earlier reaching $96.

Elias Haddad, global head of markets strategy at Brown Brothers Harriman in London, cautioned that it is premature to declare peak fear or de-escalation in the Iran conflict. “But the market is starting to sniff out the more encouraging outlook,” Haddad said. “Assuming that we still haven’t reached de-escalation, the big risk that I see is that this energy shock morphs into a fiscal shock.”