The US dollar is having its strongest run in years. On Monday, October 12, 2026, the dollar index, which measures the greenback against a basket of major currencies, climbed to its highest level since April 2025. Reuters noted it has risen about 4% in the last month, "a sizeable move in such a short space of time for any major currency, never mind the world's reserve currency." At the same time, oil prices jumped after weekend attacks on Saudi Arabia's airports. Together, a strong dollar and pricier crude form a combination that touches households, companies and governments in almost every country.
What happened in markets
- The dollar: the dollar index rose about 0.37% to roughly 102.59 on Monday, an 18-month high, according to Investrade and Reuters. EUR/USD slipped to a new low for 2026, and the dollar touched a three-week high of 158.70 against the Japanese yen.
- Oil: Brent crude futures settled at $106.65 a barrel, up 1.84%, while US WTI settled at $93.74, up 2.06%, as attacks on Saudi airports outweighed news of extra Russian diesel supply.
- Stocks: Wall Street was mixed, with the Dow up about 0.4%, the S&P 500 flat and the Nasdaq down about 0.4% as chip stocks fell. Europe gained around 0.7%, the UK about 1%, while South Korea dropped about 4%.
- Precious metals and crypto: gold eased about 0.6% to near $4,170 an ounce and Bitcoin slipped below $83,000, according to investingLive.
US Treasury markets were closed for Columbus Day, so bonds had no chance to react until Tuesday.
Why the dollar is rising
Context matters. The dollar is climbing from a low base: the index hit a four-year low in February, Reuters reported. Much of the recent move, it said, is due to worries over euro-area sovereign debt that have hammered the euro. Reuters also listed widening French and Italian bond spreads against Germany among Monday's moves.
Inflation and interest-rate expectations add fuel. Cleveland Fed President Beth Hammack said the Fed should move "relatively quickly" to a restrictive stance as inflation becomes more broad-based. Markets were bracing for US consumer price data on Wednesday, with Investrade noting the Street expects headline inflation to re-accelerate to 3.6%. Higher expected US rates tend to draw money into dollars.
Geopolitics also plays a role. In times of stress, investors often turn to the dollar as a safe haven, and the Middle East attacks have heightened security and supply concerns.
Why oil is not falling despite new supply
Over the weekend, the US announced a deal to lift sanctions on Russian diesel along with a Russia-Ukraine energy ceasefire. Markets were unimpressed. Reuters calculated that the volumes Russia would release over three months equate to roughly 12 hours of global diesel consumption, "barely even a drop in the ocean." Meanwhile, Ukraine's president said it was increasingly clear Russia would not accept the proposed ceasefire on energy strikes.
Why this matters around the world
Oil is priced in dollars
Because crude is traded in dollars, countries with weakening currencies feel a double hit when oil and the dollar rise together. Fuel, transport and food costs climb faster in local terms, which can push up inflation and squeeze household budgets far from the US.
Dollar debt gets heavier
Governments and companies that borrowed in dollars must repay in dollars. A 4% jump in a month makes those repayments costlier for anyone earning in other currencies, a particular pressure for emerging markets. Emerging-market stocks fell about 1% on Monday.
Central banks are pushed to act
A rapidly rising dollar can force other central banks to defend their currencies. Reuters noted the Indian rupee was Monday's biggest gainer on central bank action. As Reuters put it, if dollar momentum cools, "that would likely be welcomed in Washington and other capitals around the world."
Implications for ordinary investors
- Overseas holdings: if you invest in US assets from abroad, a stronger dollar boosts returns in your home currency, and the reverse is true for foreign assets held by dollar-based investors.
- Travel and imports: dollar-priced travel, gadgets and education abroad get more expensive for non-US buyers.
- Diversification: moves like this are a reminder that currency risk is a real part of any global portfolio.
What to watch next
- US inflation data: the September CPI report on Wednesday, followed by producer prices and retail sales on Thursday.
- Bank earnings: major US banks begin reporting this week, offering a read on credit and the economy.
- IMF/World Bank meetings: the annual meetings in Bangkok, where the IMF has said AI investment is keeping global growth around 3% but bringing massive disruption.
- Positioning: Reuters noted speculators' long dollar positions are quite extended, so momentum could cool.
- The Middle East: further attacks on Gulf infrastructure could push oil higher still.
The bottom line
The dollar's surge and higher oil are two sides of the same nervous market: inflation worries, debt concerns in Europe and conflict risk in the Gulf. For most of the world, the combination means costlier energy and debt. Whether it eases depends heavily on this week's inflation numbers and on events in the Middle East.
