The dollar was up 0.2% at 99.00, resuming its climb toward an over ⁠three-month high hit earlier this week

The dollar firmed on Thursday after briefly pulling back from three-month highs, as the fallout from war ​in the Middle East roiled global markets and kept sentiment fragile, bolstering demand for the safe-haven currency.

But markets remained at the mercy of the U.S.-Israel war with Iran after Iran launched missiles at Israel, sending millions of residents into ​bomb shelters.

That kept the U.S. currency in favour as it quickly reversed early losses to trade higher, leaving the euro down 0.2% at $1.1608.

Against a range of currencies, the dollar was up 0.2% at 99.00, resuming its climb toward an over ⁠three-month high hit earlier this week.

There appears to be little to no escape. Traditional safe havens, like gold, are not playing their usual part, said Bas ​van Geffen, senior macro strategist at Rabobank.

The dollar has risen nearly 1.4% for the ​week thus far, emerging as one of a handful of winners in a volatile few sessions that have dragged stocks, bonds and, at times, even safe-haven precious metals lower.

The spike in energy prices from the Middle East war has stoked fears of a resurgence in inflation that could derail the rate outlooks for central banks.

Traders are now pricing in just a 34% ​chance of a U.S. central bank rate cut in June, as compared with a near 46% chance a week ago, according to the CME FedWatch tool, though ​that has in part been driven by upbeat U.S. economic data on Wednesday.

Rate easing expectations from the Bank of England have also been pared back, while money markets increased bets on ‌European Central ⁠Bank rate hikes as early as this year.

In addition to market participants, it is central bankers who are now increasingly eyeing the return of inflation as a concern, said Thierry Wizman, global FX and rates strategist at Macquarie Group.

He added: It is the U.S.’s rate outlook that is seen to have the greatest potential to be overturned by another burst of global inflation in 2026, if energy supplies become constrained.