The dollar rose against most major currencies, as tensions renewed in the Middle East, raising concerns about escalating inflationary pressures and increasing the likelihood of global central banks moving to raise interest rates.

The dollar rose against the Japanese yen by 0.2 percent to 162.075 yen, while the euro fell 0.1 percent to $1.1397, and the British pound dropped 0.2 percent to $1.3374.

The Australian dollar also fell 0.3 percent to $0.6928, and the New Zealand dollar declined 0.1 percent to $0.5757, according to Reuters.

US and Iranian forces exchanged intense missile and drone strikes over the weekend, and Tehran again announced the closure of the vital Strait of Hormuz.

Oil prices rose in Asian trading, with Brent crude futures climbing 4.1 percent to $79.11 a barrel.

Tony Sycamore, market analyst at IG in Sydney, said: 'After the escalation of tensions last week and their continuation over the weekend, the dollar responded, and crude oil was the main driver of this move. That revives fears that if energy prices continue to rise, we may see a rate hike soon.'

Federal funds futures imply a 50.9 percent probability of two or more rate hikes by the US central bank's December meeting, compared to a 47.6 percent probability on Friday, according to the CME Group's FedWatch tool.

The US dollar index, which measures the greenback against a basket of six major currencies, rose 0.1 percent to 101.13, after earlier touching its highest level since July 8.

Thomas Mathews, head of Asia-Pacific markets at Capital Economics in Wellington, said: 'The dollar was undoubtedly the biggest beneficiary of the previous conflict, but this time it enters from a completely different point, having already recorded a notable rise amid ongoing reassessment of Fed expectations.'

He added: 'It is not clear to me whether the dollar will rise to the same extent this time if the situation continues to deteriorate, which I think is reflected in market moves so far.'

Westpac analysts wrote in a research note that inflation risks will remain in focus, with US CPI data due on Tuesday, followed by PPI data the next day, in addition to Fed Chairman Kevin Warsh's testimony before the House and Senate.

The Bank of Japan may raise its economic growth forecasts for fiscal 2026, focusing on the risk of inflation exceeding expectations, as cost increases from a weak yen and strong demand for artificial intelligence partially offset the impact of lower oil prices, according to three sources familiar with the central bank's thinking, told Reuters.

In the cryptocurrency market, Bitcoin fell 2.1 percent to $62,790.02, while Ethereum dropped 2.3 percent to $1,779.01.