BBH reported that higher crude oil prices and rising global bond yields have supported the US Dollar, leaving it firmer against major currencies. It said Brent crude was near $104 a barrel, the highest since April 7, but below the March triple top around $120.
It added that the energy supply shock remains due to the US-Iran war being unresolved. It said global bond yields are facing renewed upward pressure as higher oil prices lift expectations for central bank rates.
The update said the worst phase of the energy shock is likely past. It cited the US extending the ceasefire indefinitely and outlined a navigation stance described as “Open for All or Closed to All” for vessels using the Strait of Hormuz.
It said this approach could speed a reopening of the Strait of Hormuz by increasing shared economic costs and incentives for a diplomatic outcome. It expects interest rate differences between the US and other major economies to keep the US Dollar Index within the 96.00–100.00 range.
Higher crude oil prices and rising global bond yields are currently supporting the US dollar. Recent data shows Brent crude futures are hovering around $98 a barrel, pushing central bank rate expectations higher. Consequently, the dollar is showing firmness against other major currencies.
We are sticking to our view that the worst of the energy shock we experienced in 2025 is probably behind us. Prices remain well below the triple top of around $120 a barrel seen back in March of last year during the US-Iran conflict. The diplomatic channels that were opened then seem to be preventing a return to those extreme price levels.
As such, interest rate differentials should continue to keep the US Dollar Index, or DXY, anchored within its range of roughly 96.00 to 100.00, which has held for over a year now. While the Federal Reserve’s latest dot plot suggests a pause, key counterparts like the European Central Bank continue to signal caution, maintaining a favorable rate differential for the dollar. For derivative traders, this suggests that strategies built around the DXY remaining range-bound are attractive.
With the DXY currently trading near 98.50, selling volatility could be a primary strategy in the coming weeks. Traders might consider option strategies like iron condors or strangles centered within the 96.00-100.00 range. This approach profits from time decay and the expectation that the index will not make a significant move above resistance or below support.
