The dollar index gained 0.08% to 99.62

The dollar rose on Monday as escalating retaliatory ​threats in the Middle East war curbed risk appetite and lifted demand for safe-haven assets.

The Australian dollar, a liquid proxy for global sentiment, dropped as equities sold off across Asia. Japan’s top currency diplomat said his government is ready to take action to counter foreign-exchange volatility as the yen edged lower.

The market’s going with the idea that ​those countries and economies that enjoy a positive supply shock from energy are likely to perform better than those that ⁠are suffering from a negative supply shock, Rodrigo Catril, a currency strategist at National Australia Bank, said on a podcast.

So, you’re seeing the euro and ​the yen struggling to perform. And again, if this conflict proves long-lasting, you would think that those are the currencies that are likely to suffer a bit ​more, he said.

The dollar index gained 0.08% to 99.62. The gauge on Friday closed out its first weekly decline since the start of the war, as surging oil prices on inflation prompted central banks to turn hawkish.

The euro slipped 0.16% to $1.1552, as the yen weakened 0.14% to 159.45 per dollar. Sterling dropped 0.06% to $1.3331.

With the yen weakening back toward the key 160 per dollar level, Japan’s top currency diplomat Atsushi Mimura signalled caution about speculative activity in oil markets spilling over into foreign exchange.

Speaking in Sydney, IEA Executive Director Fatih Birol warned that the current crisis poses a major threat to the global economy, ​surpassing the Middle East energy shocks of ​the 1970s.

Major equity indexes across ⁠Asia tumbled, with Nikkei down as much as 5% at one point. Inflation concerns hit global debt markets, with Japanese government bonds declining sharply.