Dollar holds steady as oil rises and Treasury yields climb amid risk selloff

The dollar held firm against most major currencies on Monday as heightened geopolitical tensions in the Middle East lifted oil prices and a global bond selloff dampened investor risk appetite. Traders also remained watchful for potential intervention by Japanese authorities as the yen weakened further.

Brent crude futures rose more than one percent to over $110 a barrel following an attack on a nuclear power plant in the United Arab Emirates and reports that diplomatic efforts to end the ongoing conflict involving the U.S., Israel, and Iran have stalled. Analysts noted that signs the Strait of Hormuz, a critical oil shipping lane, could remain disrupted are exerting upward pressure on the dollar, with the currency estimated to gain between 0.5 and 1.0 percent for every 10 percent rise in oil prices.

Concurrently, a deepening global bond rout pushed yields higher, fanning fears that rising energy costs could fuel persistent inflation and prompting markets to increase bets on interest rate hikes from central banks. The yield on the benchmark 10-year U.S. Treasury note jumped to 4.6310 percent, while the two-year yield hit 4.1020 percent, levels not seen in months. Analysts at...