The dollar climbed to a one-week high as renewed tensions in the Middle East boosted demand for safe-haven assets.

The U.S. dollar climbed to a one-week high against major currencies on Monday, as renewed tensions between the U.S. and Iran and fading hopes for a Middle East peace agreement pushed investors toward safe-haven assets.

Washington said it had seized an Iranian cargo vessel attempting to breach its blockade, while Tehran vowed retaliation, raising fears that hostilities could flare up again. Iran also announced it would not join a second round of talks the U.S. had aimed to begin before a two-week ceasefire expires on Tuesday.

According to Charu Chanana, chief investment strategist at Saxo, the weekend escalation has brought geopolitical risk back into focus just as markets had begun to price in a potential peace dividend. She added that rising oil prices are not only an energy concern but also have broader implications for economic growth and interest rates.

The euro slipped 0.14% to $1.1746, while the British pound dropped 0.29% to $1.3479. The Australian dollar, often seen as a risk-sensitive currency, declined 0.3% to $0.7145 in early trading.

The U.S. dollar index, which tracks the currency against six major peers, stood at 98.38, near a one-week high and recovering some recent losses. Despite this rebound, the index remains down 1.5% for April, as improving risk sentiment earlier in the month had weighed on the dollar. In contrast, it surged 2.3% in March amid strong safe-haven demand following the outbreak of war.

Barclays analysts noted that investor sentiment still favors the dollar, suggesting there may be room for further downside if Middle East tensions ease. They added that any short-term market volatility could present opportunities to rebuild short dollar positions, though uncertainty remains high.

Now in its eighth week, the conflict has triggered one of the most severe disruptions to global energy supply, driving oil prices sharply higher due to the effective closure of the Strait of Hormuz, a key route for roughly 20% of global oil shipments.

The U.S. has continued its blockade of Iranian ports, while Iran has alternated between lifting and reimposing restrictions on shipping through the strategic waterway. This uncertainty pushed oil prices higher on Monday, with Brent crude rising 7% to $96.8 per barrel and U.S. West Texas Intermediate gaining over 8% to $90.74.

Nick Twidale, chief market strategist at ATFX Global in Sydney, said the Strait of Hormuz remains the central concern, and hopes for renewed negotiations before the ceasefire ends now appear unlikely. He expects risk assets to face further downward pressure in the near term.

Elsewhere, the New Zealand dollar edged down slightly to $0.5876, while the Japanese yen weakened to 159.06 per dollar, approaching the key 160 level that could prompt intervention by authorities.

Attention is also turning to the Bank of Japan’s upcoming meeting later this month. Governor Kazuo Ueda has avoided firmly signaling an April rate hike due to uncertainty from the conflict but hinted at a more hawkish stance following last week’s IMF meetings, leaving open the possibility of policy tightening by June.

In cryptocurrency markets, bitcoin fell 0.56% to $74,229.65, while ether declined 0.2% to $2,276.04.