US Dollar Strengthens Amid Surge in Oil Prices and Bond Pressure

The US dollar strengthened against most major world currencies in trading on Monday (18/05/2026), amid rising global oil prices and increasing market concerns regarding global inflation. This sentiment was triggered by the heating up of conflicts in the Middle East, which has prompted investors to pivot towards safe-haven assets, including the US dollar.

According to Reuters, on Monday (18/05/2026), the euro fell by more than 0.1 per cent to 1.1609 US dollars. The pound sterling also weakened by more than 0.1 per cent to the level of 1.3305 US dollars. Meanwhile, the US dollar index, which measures the strength of the greenback against a basket of major currencies, rose slightly to 99.393.

The strengthening of the US dollar occurred alongside a surge in global oil prices due to increased geopolitical tensions in the Gulf region. Brent crude prices rose by more than 1 per cent, breaking through 110 US dollars per barrel after a nuclear power plant in the United Arab Emirates was reported to have been attacked by drones. Saudi Arabia also reported the successful interception of three drones, while negotiations regarding the US-Israel conflict with Iran are said to remain at a deadlock.

Barclays analysts suggest that these conditions present further opportunities for the US dollar to strengthen in the short term. “Market and bond risks appear to be worsening, while conditions for US dollar strengthening are increasingly opening up,” Barclays wrote in its note. Barclays estimates that the US dollar could strengthen by approximately 0.5 per cent to 1 per cent for every 10 per cent increase in oil prices.

Meanwhile, Capital Economics warned that prolonged disruptions in the Strait of Hormuz could deplete global oil reserves more rapidly. The institution estimates that Brent crude prices could potentially rise to the range of 130 US dollars to 140 US dollars per barrel if distribution disruptions continue until the end of June.