The U.S. dollar index was 0.12% higher at 99.22 after two straight weeks of meagre declines

The dollar firmed on Monday as ​investors pondered possible rate hikes from the Federal Reserve later this week, while rising oil prices due to the intensifying ‌war in the Gulf dampened sentiment.

Global policymakers are grappling with erratic pricing pressures from the six-month-long U.S.-Israeli war on Iran that has pushed oil prices well above $100 per barrel and upended the path for rates amid bouts of selloffs in long-end bonds.

The European Central Bank raised rates last week and warned of further hikes, setting the stage for the Fed policy decision on Wednesday and a widely expected rate ​hike from the BOJ on Friday.

Traders ramped up bets for a Fed rate hike after data on Friday showed U.S. consumer prices accelerated in August; they priced ⁠in an 86% chance of an increase this week and another move higher later in the year, the CME FedWatch tool showed.

The Fed could decide to wait, ​but that is complicated by its October meeting being just ahead of the U.S. midterm elections and waiting until December to move will be too long, said ​Shane Oliver, chief economist and head of investment strategy at AMP.

The euro was 0.1% weaker at $1.1585, while sterling last bought $1.3516. The U.S. dollar index was 0.12% higher at 99.22 after two straight weeks of meagre declines.

U.S. Treasury yields remained near multi-year highs, with the 2-year yield, which typically moves in step with Fed rate expectations, easing ​a touch to 4.6148%, after rising 26 basis points last week.

The rising yields and shifting rate expectations have so far failed to push the dollar higher ​as central banks in major economies are also expected to raise rates while worries around Fed policy credibility linger.