Dollar Index Holds Near Six-Week Lows as Risk Appetite Rises on U.S.–Iran Negotiation Hopes

The U.S. dollar index remained under pressure on Tuesday, trading around the 98.3 level and hovering near its lowest point in six weeks, as investors increasingly rotated into risk-sensitive assets.

The move reflects growing optimism in global markets that a diplomatic breakthrough between the United States and Iran could still be within reach, despite recent setbacks.

Over the weekend, negotiations between the two countries failed to produce an agreement, prompting President Donald Trump to announce a blockade targeting Iranian oil shipments. However, sentiment shifted shortly thereafter when Trump indicated that Iran had reinitiated contact and signaled willingness to resume discussions.

This renewed diplomatic momentum has fueled expectations of a potential long-term ceasefire agreement. Market participants are also closely watching the possibility of reopening the strategically critical Strait of Hormuz, a key global oil transit chokepoint.

As a result, oil prices have declined, easing concerns over sustained energy-driven inflation. The pullback in crude has, in turn, tempered expectations of a more aggressive monetary policy stance from the Federal Reserve.

Adding to this narrative, Federal Reserve Governor Stephen Miran noted that the recent energy shock linked to tensions with Iran has not yet filtered into long-term inflation expectations. He further emphasized that price pressures are likely to return to the central bank’s target within the next year.

The combination of easing inflation risks, softer oil prices, and renewed geopolitical optimism has contributed to downward pressure on the dollar, while reinforcing investor appetite for equities and other higher-yielding assets.