Dollar Hits 18-Month High As Gold And Oil Diverge On Middle East Risk

The U.S. dollar rose to an 18-month high in the October 12 session as geopolitical risks increased, even as gold slipped toward $4,160 on rate-hike concerns tied to the same Middle East tensions. Normally a safe-haven asset like gold would rise alongside dollar strength during periods of elevated geopolitical risk, but the prospect of higher rates is pressuring the metal instead. Oil prices moved in the opposite direction investors might expect from rising Gulf supply risk. Crude ticked lower after Russia signaled it would increase diesel exports, a supply development that outweighed concerns about disruption risk in the Gulf. The divergence shows markets are pricing rate expectations more heavily than geopolitical risk premium right now. Whether that holds depends on how the Reserve Bank of Australia and the Bank of Japan signal policy in coming weeks, and whether Gulf tensions escalate into actual supply disruption.