NEW YORK — The U.S. dollar strengthened Monday as investors turned toward the traditional safety of the greenback after Washington intensified economic pressure on Iran while escalating a separate trade dispute with Canada.
The dollar’s move came after the greenback had suffered three weekly declines in four weeks, pushing it to roughly three-month lows. The latest developments in Iran and Canada gave traders fresh reasons to reassess geopolitical and economic risks.
The U.S. Dollar Index rose about 0.17% to 98.99, according to Reuters, as investors digested the expanding sanctions campaign against Iran and renewed tariff tensions with Canada.
Iran sanctions put markets on alert
U.S. Treasury Secretary Scott Bessent announced expanded secondary sanctions targeting Iran’s remaining economic channels, part of Washington’s effort to pressure Tehran and restrict its access to international trade and finance.
The administration has warned countries and companies continuing significant economic relationships with Iran that they could face consequences under the new measures. The move represents a major escalation in Washington’s economic campaign against Tehran.
The pressure was already being reflected in Iran’s currency market.
The Iranian rial fell to around 1.992 million per U.S. dollar on the unofficial market, according to figures cited by The Guardian, marking another record-low level for the currency.
The worsening economic pressure comes as the conflict in the region continues to threaten trade, shipping and energy markets.
Canadian dollar takes another hit
The Canadian dollar, commonly known as the loonie, moved sharply lower after President Donald Trump announced plans for a 50% tariff on Canadian automobiles, trucks and related products.
Reuters reported that the Canadian dollar fell about 0.61% to C$1.385 per U.S. dollar as investors reacted to the tariff escalation.
The development came after U.S.-Canada trade negotiations broke down, adding another layer of uncertainty for Canadian businesses and investors.
Canadian Prime Minister Mark Carney has pledged a response to the U.S. measures, raising concerns that the latest dispute could develop into another round of retaliatory tariffs.
The contrast in currencies was notable: while the Canadian dollar weakened under renewed trade pressure, the U.S. dollar benefited from increased demand for perceived safety amid geopolitical uncertainty.
Markets watch oil, bonds and the Federal Reserve
Currency traders are not watching Iran and Canada in isolation.
Oil prices also moved lower on Monday despite the announcement of additional U.S. sanctions on Iran. Reuters reported that Brent crude settled down $2.22, or 2.35%, at $92.17 a barrel, while U.S. West Texas Intermediate fell $2.05, or 2.35%, to $85.01.
At the same time, U.S. bond markets were responding to Treasury plans to increase buybacks of longer-dated government debt, while investors prepared for remarks from Federal Reserve Chair Kevin Warsh at the Jackson Hole economic symposium later in the week.
That combination leaves investors balancing several competing forces: geopolitical risk, trade uncertainty, inflation concerns, U.S. fiscal policy and the future direction of interest rates.
Why the dollar’s next move could matter
The dollar’s latest rise does not necessarily signal the end of its broader weakness.
The greenback had recently fallen to a three-month low and remains under pressure from concerns surrounding U.S. fiscal conditions, trade policy and monetary policy uncertainty. Analysts also caution that the eventual impact of the Iran sanctions will depend on how extensive the measures become and how other countries respond.
For Canada, the immediate concern is different. A prolonged tariff confrontation with its largest trading partner could increase costs for businesses, disrupt supply chains and weigh on economic growth.
For global investors, meanwhile, the bigger question is whether the latest geopolitical and trade shocks remain contained — or begin spilling into currencies, commodities and financial markets more broadly.
And that is where the next market move could become much more important.
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