Dollar's Record Monthly Advance
US Dollar Nears Year-Long Gain Driven By Hawkish Fed And Global Tensions
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The US dollar is on track for its best month in nearly a year, with the Dollar Index (DXY) up 2.5% in June — its biggest monthly gain since July 2025 — according to MarketScreener. The greenback held steady at 101.34 on Monday, just below last week's 13-month high of 101.80, as investors weighed fragile Gulf ceasefire talks and braced for key US jobs data.
The rally follows a weekend of escalating US-Iran military exchanges. Washington and Tehran agreed on June 29 to pause "kinetic activity" and send delegations to Qatar on June 30, according to Axios. But the ceasefire is paper-thin. Iran struck two tankers in the Strait of Hormuz last week, the US launched retaliatory airstrikes, and Iran hit US air bases in Kuwait and Bahrain on June 28.
How Six Weeks of Gulf Combat Powered the Dollar
The dollar's June surge is rooted in the broader Gulf war that began on February 28, when the US and Israel launched "Operation Epic Fury." The campaign killed Iranian Supreme Leader Ayatollah Ali Khamenei. Iran responded by blockading the Strait of Hormuz — the world's most vital oil chokepoint — sending global markets into chaos, according to The Guardian.
Investors poured money into US assets as a safe haven. The AI boom added fuel. The US attracted $109.1 billion in private AI investment last year, according to Yahoo Finance. That capital inflow pushed the DXY from a low point in May to 101.80 by June 24. Joseph Capurso of CBA expects the dollar to "grind higher" on what he calls the "US exceptionalism" narrative.
Tit-for-Tat Attacks Threaten the Qatar Ceasefire
The fragile truce nearly collapsed before it began. On June 25, an Iranian drone struck the Singapore-flagged ship *M/V Ever Lovely* in the Strait of Hormuz, according to Miami Herald. The US hit back with airstrikes on Qeshm Island. Iran then struck the tanker *M/T Kiku* on June 27. By June 28, Iran fired drones and missiles at US bases in Kuwait and Bahrain.
President Trump warned on Truth Social: "There may come a point when we are no longer able to be reasonable... If that happens, the Islamic Republic of Iran will no longer exist!" according to The Guardian. Iran's Foreign Minister Abbas Araghchi fired back, saying any attempt to bypass the Strait would "only lead to further complications and increase tension."
A Hawkish New Fed Chair Adds to Dollar Strength
Kevin Warsh was sworn in as Federal Reserve Chair on June 17, confirmed by the Senate 54–45, according to Mahoning Matters. He has dropped the Fed's tradition of forward guidance entirely. At his first meeting, Warsh said the Fed is "committed to bringing inflation under control" — a hawkish signal that pushed Treasury yields higher. The 2-year yield now sits at 4.1%.
MUFG analysts warn that if the Fed delivers multiple rate hikes to fight energy-driven inflation, the dollar could gain another 3–5%. Marc Chandler of Bannockburn Capital Markets says "resilient economic data" combined with a hawkish Fed is "restrengthening the US economy." Oil fell 24% over the past month on ceasefire hopes, but rose 0.93% on Monday after the weekend attacks.
Jobs Report and Sintra Panel Are the Week's Big Tests
Markets face two major events this week. Thursday's US jobs report — due July 2 — is expected to show between 110,000 and 170,000 new jobs, with unemployment holding at 4.3%, according to Kentucky.com. A strong number would cement Fed rate-hike bets and likely push the dollar to new highs. A weak number could trigger a sharp reversal.
On July 1, Warsh shares a stage with ECB President Christine Lagarde and Bank of England Governor Andrew Bailey at the ECB's Sintra Forum. Lagarde opened the forum on June 29 focused on "Innovation, Growth and Stability" while warning of the "immediate pass-through" of energy prices to European consumers. European headline inflation is on track to stay above 3.0% into early 2027 if Gulf tensions persist.
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