FOREX: Dollar strengthens as Trump says Iran peace offer 'unacceptable'

The U.S. dollar strengthened in Asian trading on Monday as escalating geopolitical tensions between the United States and Iran rattled global markets, while concerns over energy supply disruptions pushed oil prices higher.

Investor sentiment was weighed down by signs that diplomatic talks between Washington and Tehran have stalled, with reports indicating that the strategic Strait of Hormuz remains effectively shut amid rising regional tensions. The waterway is a critical route for global oil shipments, and any prolonged disruption has raised fears of tighter supply.

U.S. stock futures were volatile, while Asian equity markets saw mixed moves. Gains in select artificial intelligence-related shares helped lift benchmark indexes in Tokyo and Seoul, offering some support to regional sentiment despite broader uncertainty.

U.S. President Donald Trump on Sunday rejected Iran’s response to a proposed peace framework aimed at ending the conflict, calling Tehran’s demands “totally unacceptable.”

According to Iranian media, Tehran’s proposal emphasized a comprehensive ceasefire across all fronts, alongside the lifting of sanctions and reparations. It also called for formal recognition of Iran’s control over the Strait of Hormuz.

“The conflict in the Middle East is now entering its 11th week,” said Bruce Kasman, global head of economics at JPMorgan. “Energy prices have surged but remain at levels that are headwinds rather than expansion-ending obstacles.”

Kasman added that the risk of a sharper market reaction increases the longer the Strait remains closed, warning that commodity markets could face operational stress as early as June.

Oil prices surged in early trade, with Brent crude rising 3.3% to $104.67 per barrel and U.S. West Texas Intermediate climbing 3.5% to $98.82 per barrel.

The dollar benefited from safe-haven demand, edging up 0.2% against the Japanese yen to 156.88, while the euro slipped 0.2% to $1.1760.

Japan is banking on a more hawkish stance from the Bank of Japan, along with support from U.S. Treasury Secretary Scott Bessent, to help slow the yen’s decline through potential intervention. Both Europe and Japan remain heavily dependent on oil imports, while the United States is a net energy exporter.

On Wall Street, S&P 500 futures dipped 0.1%, while Nasdaq futures eased 0.2%, pausing after last week’s record highs driven by strong corporate earnings and a solid U.S. payrolls report.

Earnings season continues this week, with results expected from Cisco Systems and Applied Materials, while major names including Nvidia and Walmart are scheduled to report later in the month.

In Asia, Japan’s Nikkei index rose 0.8% in early trade, catching up with Wall Street’s late-week gains. South Korea’s KOSPI index surged nearly 5%, driven by strength in semiconductor stocks.

The geopolitical situation is also expected to feature in upcoming diplomatic engagements, with the Middle East crisis likely to be discussed during U.S. President Trump’s visit to China starting Wednesday. He is set to meet Chinese President Xi Jinping for their first face-to-face talks in more than six months, with trade, Taiwan, artificial intelligence, and nuclear policy also on the agenda.

In commodities, gold slipped 0.5% to $4,690 per ounce, as it failed to attract significant safe-haven demand despite ongoing market uncertainty.

— Reporting by Wayne Cole; Editing by Edmund Klamann / Reuters