Oil and the dollar: How energy shocks can reinforce USD dominance

Business Recorder’s analysis says oil-price shocks can strengthen or weaken the US dollar depending on their effects on inflation, interest-rate expectations, Treasury yields and demand for liquid assets. WTI rose above 100 USD in early September, eased to the mid-80s and recovered to 90 USD in October, illustrating how quickly oil can move.

Because crude is priced mainly in dollars, a stronger US currency can raise local-currency energy costs for importers even without another increase in oil prices. The article says supply disruptions can lift inflation expectations and yields, supporting the dollar, while growth concerns and expectations of easier policy could instead weigh on yields and the currency. It recommends assessing oil alongside foreign exchange, bonds, inflation data and risk sentiment.