Markets are on alert. The dollar rose to its highest level in the last year and a half

While global markets focus on the US's monetary policy and wars in the Middle East, the US dollar is hovering near its highest levels in the last year and a half.

While escalating geopolitical tensions cause investors to maintain their cautious stance, critical US inflation data to be announced this week will determine the course of interest rate decisions.

The increasing attacks of the Houthis against Saudi Arabia in Yemen and the targeting of two oil tankers over the weekend created fluctuations in the oil markets.

Following US President Donald Trump's statement that an energy ceasefire had been reached between Ukraine and Russia, Brent crude oil futures lost 0.5 percent in value, falling to $104 per barrel.

While oil futures prices are almost 45 percent above pre-war levels, transactions in some physical markets are as high as twice these levels.

The dollar index, which measures the value of the US currency against six other major currencies, rose 0.2 percent to 102.43, just below last week's peak.

According to weekly data from the US market regulator, investors are increasing the positions they opened in anticipation of the rise in the dollar.

These positions, which were at $8.4 billion three weeks ago, reached approximately $36 billion in the week ending October 7, mostly against the euro.

Speaking to Reuters, MUFG Currency Strategist Lee Hardman evaluated the latest activity in the markets with the following words: "Even though market actors have withdrawn their expectations for an interest rate increase by the US Federal Reserve (Fed), negative developments abroad have increased the attractiveness of the US dollar and strengthened the currency."

The US consumer inflation report to be published on Wednesday is one of the last critical data before the Fed's policy meeting this month.

This report is expected to play a decisive role in determining the short-term direction of the dollar.

Data released last week revealed that US consumer confidence declined further at the beginning of October, as the cost of living triggered by the conflicts in the Middle East negatively affected household perception.

The Fed increased interest rates last month for the first time since 2023 in order to rein in inflation.

Markets closely monitor economic data to predict whether decision makers will take a new step.

According to CME FedWatch data, investors increased the probability that the Fed will keep interest rates steady this month to 81 percent, from 51 percent a month ago. In money markets, the probability of a new interest rate increase this month is priced at only 20 percent.