The dollar rose sharply on Thursday after US President Donald Trump's address on Iran shattered hopes for a swift end to the conflict, sending investors towards safe-haven assets as oil prices jumped and stocks tumbled.
In a televised speech, Trump vowed more aggressive strikes on Iran in the next two to three weeks, offering no concrete timeline to open the Strait of Hormuz or end a war that has rattled investors and roiled markets, Reuters reported.
Iran's military responded with a warning for the United States and Israel of "more crushing, broader and more destructive" attacks in store.
Investors were quick to sell riskier assets such as stocks and buy the US dollar, pushing the yen, euro and sterling lower.
The dollar index, which measures the greenback against a basket of currencies, climbed 0.68% to 100.24 as the safe-haven trade came back on, putting it on track for its best day since March 18.
Thursday's advance wiped out most of the greenback's declines from the past two days amid earlier optimism about de-escalating the Iran war, putting it on track for another winning week.
Stocks slid and oil prices surged, with Brent crude futures rising almost 8% to $109.10 per barrel, after Trump's address sparked fresh concerns about sustained disruption.
"Trump's comments failed to reassure markets ... markets are starting to realize that the war will probably escalate further from here before de-escalating," said Carol Kong, a currency strategist at Commonwealth Bank of Australia.
"The dollar can definitely increase further from here against all the major currencies" as markets wake up to the fact that the global economy will slow down materially, she added.
Non-dollar currencies extended their falls as oil prices climbed in European trading.
The euro fell 0.66% to $1.1513 and sterling slid 0.88% to $1.319, both giving up some recent gains.
The risk-sensitive Australian dollar, commonly seen as a barometer of global growth expectations, fell 0.95% to $0.6863.
The Japanese yen traded 0.6% weaker at 159.72 per dollar , nearing the psychologically important 160 level that is viewed as the line in the sand for intervention by Japanese authorities.
Trump's comments also sent US Treasury yields higher on growing fears that inflation from higher oil prices would close the door to rate cuts.
That sets the stage for Friday's US non-farm payrolls report. The market is looking for a 60,000 rise in jobs for March, according to the median estimate of economists polled by Reuters.
"Another miss could rattle the markets and crank the volume up on the chorus warning about stagflation," said Kyle Rodda, senior financial market analyst at Capital.com.
"The markets could be extra choppy going into the Easter long weekend."
