Oil prices surged, the dollar strengthened and equities declined on Monday as the military conflict in the Middle East appeared likely to drag on, threatening to derail the global economic recovery and potentially reignite inflation.

In currency markets, the euro and the pound each fell by around 1%. The dollar emerged as the main beneficiary, advancing even against traditional safe-haven currencies. Previously, the dollar’s conventional role as a global safe haven had been questioned due to the unpredictability of U.S. policymaking.

Investors now face a busy week of U.S. macroeconomic releases, including the ISM manufacturing index, retail sales figures and the closely watched nonfarm payrolls report.

Any signs of weakness could undermine confidence in the economy following a disappointing fourth quarter, while at the same time increasing expectations of Federal Reserve rate cuts.

The EUR/USD pair is attempting to consolidate below the 1.1750–1.1800 area.