Oil Prices Set to Soar, Trade War Reignited, VIX Surges—How Did the Dollar Become the Winner?

Huitong Finance APP News — On Thursday (March 12) during Asian trading hours, the US dollar index continued its upward trend from the previous two trading days, currently trading around 99.45, up approximately 0.2% intraday, approaching the three-and-a-half-month high of 99.70 set on Monday. Rising oil prices have boosted inflation expectations, prompting traders to reassess global central bank policies, with the dollar’s appeal as a safe haven and yield asset increasing.

After Iran attacked a commercial ship and claimed the world should prepare for $200 per barrel oil, the Strait of Hormuz traffic has sharply decreased, and the risk of energy supply disruptions has risen again, becoming the biggest source of uncertainty in the current market.

Iran Attacks Commercial Ship, Claims Readiness for $200 Oil, Hormuz Disruption Intensifies

After Iran attacked a commercial ship on Wednesday, it claimed that the world should prepare for $200 per barrel oil. Traffic through the Strait of Hormuz has sharply decreased, with economists warning that rising oil prices will push up energy costs and suppress global growth. The longer the conflict lasts, the higher the risk.

The blockade affects not only oil but also liquefied natural gas and fertilizer shipments. The longer the blockade, the greater the price pressures. ANZ Bank strategists noted that although Trump claimed the war would end soon, energy prices are likely to remain volatile.

Global Central Bank Hawkish Expectations Rise, RBA May Continue Rate Hikes

Swap pricing indicates traders expect faster tightening by central banks: the European Central Bank may raise interest rates as early as June; the Reserve Bank of Australia may hike rates in the coming week and in May; Fed futures show the probability of the Federal Reserve holding rates steady in July has risen to 50.7%, a significant increase.

Rising oil prices have boosted inflation expectations, forcing markets to reprice policy paths, with hawkish central bank stances becoming the consensus.

US Launches Trade Investigations, Risk Appetite Further Dented

The US has launched new trade investigations against 16 major trading partners, further dampening global risk appetite. The Chicago Board Options Exchange (CBOE) WTI Oil Volatility Index (OVX) surged to 121.01, the highest level since early 2020 during the pandemic. Trade uncertainties, combined with energy crises and inflation pressures, have sharply increased investor risk aversion.

Rising oil prices, heightened inflation expectations, hawkish shifts by central banks, and trade investigations have collectively amplified global financial market volatility. Investor risk appetite has fallen to very low levels, with funds flowing into cash and short-term instruments.

Summary

The dollar approaches a three-and-a-half-month high of 99.70, while EUR and JPY remain under pressure. Rising oil prices reinforce hawkish expectations for global central banks. After Iran’s attack on a commercial ship and its declaration of readiness for $200 oil, disruptions in Hormuz heighten energy supply concerns.

Swap pricing indicates the ECB may hike rates in June, the RBA may continue rate hikes, and the probability of the Fed holding steady in July has risen to 50.7%. The US has launched trade investigations against 16 countries, further dampening risk appetite, with OVX surging to 121.01, a pandemic-era high.

Currently, markets are dominated by inflation expectations and geopolitical uncertainties, with risk aversion sharply rising. Short-term volatility is expected to remain high. Investors should watch for sustained high oil prices, renewed inflation pressures, and shifts in central bank policies, as well as developments in the Middle East.

(DXY daily chart, source: Yihuitong)

As of 13:32 Beijing time, the US dollar index is at 99.45.

(Editors: Wang Zhiqiang HF013)

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