Dollar Steady at 13-Month Highs Amid Inflation and Oil Jitters
By John Nada·Jul 14, 2026·2 min read
Dollar clings to 13-month highs as U.S. inflation and Gulf tensions drive oil prices up, fueling rate hike speculations and Treasury yield spikes.
"Core inflation, combined with rising oil prices, is supportive for the dollar and then there's Warsh," said City Index market strategist Fiona Cincotta. The dollar is sitting near 13-month highs as markets brace for U.S. inflation data and potential upheavals in monetary policy. The stakes are high, with the Federal Reserve's new chair, Kevin Warsh, preparing for his first semiannual testimony to Congress.
U.S. and Iranian forces have been trading attacks in the Gulf, causing maritime traffic through the Strait of Hormuz to falter. The ripple effect? Oil prices are nudging towards $90 a barrel, according to Yahoo Finance. This tension has markets on edge, with a growing belief that global interest rates might start climbing sooner than anticipated.
The situation is precarious. Investors are zeroed in on how these geopolitical tensions might affect oil flows and, consequently, inflation. Warsh, who has been tight-lipped about future policy directions, recently remarked that those hoping for a dovish turn on inflation policy may be sorely disappointed.
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Markets are currently pricing a 20% chance of the Fed hiking rates this month, which has already pushed U.S. Treasury yields to a striking 4.6%, the highest seen since May. This move offers a sturdy undercurrent for the dollar.
Meanwhile, Federal Reserve Governor Christopher Waller has hinted at the possibility of near-term rate increases if inflation data remains robust. Economists polled by Reuters expect headline inflation in the U.S. to be around 3.8% for June, with core inflation—excluding food and energy—at 2.8%.
Currency markets are roiling with anticipation. The euro is up marginally, trading at $1.1396, while sterling has edged higher to $1.338. Overnight currency volatility is notable, with the euro's implied volatility briefly topping 10%.
The Japanese yen is feeling the pressure, sitting at 162.24 per dollar, barely above its 40-year lows. There have been whispers about possible intervention by Tokyo, especially after Finance Minister Satsuki Katayama suggested adjustments to state pension fund asset allocations should the economic landscape shift dramatically.