Dollar Firms as US-Iran Strikes Renew Peace Deal Uncertainty

May 26, 2026 — Dollar Firms as US-Iran Tensions Escalate. The U.S. dollar firmed on Tuesday after fresh U.S. military action against Iran raised questions over recent progress toward a potential peace deal between the two countries.

The dollar index and dollar index futures both rose 0.1%, recovering part of recent losses as investors reassessed geopolitical risks in the Middle East.

Major currencies weaken against stronger dollar

Strength in the greenback pressured global currency markets, with the euro and British pound retreating slightly after a positive start to the week.

The Japanese yen, Chinese yuan, Australian dollar, and Singapore dollar also weakened as risk sentiment deteriorated following renewed tensions.

Oil prices rise amid geopolitical concerns

Oil prices surged after Monday’s attacks, reversing part of recent declines and keeping markets focused on inflation risks linked to energy supply disruptions.

The rebound in crude prices also supported the U.S. dollar, which tends to benefit from rising inflation expectations.

Peace talks remain uncertain

Despite earlier reports suggesting progress in negotiations, uncertainty remains over U.S.-Iran talks. Officials had previously indicated that both sides were nearing a framework agreement involving the reopening of the Strait of Hormuz and a ceasefire extension.

However, recent strikes have clouded the outlook, with U.S. officials stating that reaching a final agreement could still take several days.

Yen steady as Japan signals possible policy shift

The Japanese yen remained broadly unchanged against the dollar. Bank of Japan Deputy Governor Ryozo Himino said policy adjustments would depend on Middle East developments, as expectations grow for a potential rate hike next month.

Separate inflation data showed Japan’s core consumer price index rising above expectations and remaining well above the BOJ’s 2% target, reinforcing bets on tighter policy ahead.

Asian currencies broadly under pressure

Most Asian currencies weakened as oil prices rebounded and risk appetite declined. The Australian dollar fell nearly 0.2%, while the Chinese yuan and Singapore dollar also edged lower.

The Indian rupee rose 0.3% against the dollar after recent volatility, while the South Korean won was the only outlier, strengthening 0.4% on support from local equity gains.