SINGAPORE: The dollar rallied to a three-month high in early trading in Asia on Wednesday, with investors ​retreating from the ⁠euro as the growing conflict in the Middle East sparked fears of a ‌sustained rise in energy prices.

The euro traded down 0.1% at $1.1604, extending losses into a third day after ​earlier hitting its weakest since late November. That followed data released on Tuesday which showed euro zone inflation ​rising more ​than expected in February before the start of the Iran conflict.

"The impact of the Iran war on EUR/USD boils down to one thing: energy," said ⁠George Saravelos, global head of FX research at Deutsche Bank. "There is a negative supply shock under way which represents a direct tax on Europeans that has to be paid to foreign producers in dollars."

Financial markets turned sharply risk-off on Tuesday as growing fears of ​a surge in ‌inflation rippled across ⁠stocks and bonds after ⁠Israeli and U.S. forces pounded targets across Iran, prompting a rush for cash among investors.

Global ​oil and gas prices have jumped as the U.S.-Israeli war on ‌Iran halts energy exports from the Middle East, ⁠with Tehran's attacks on ships and energy facilities closing navigation in the Gulf and forcing production stoppages from Qatar to Iraq.

The benchmark Brent crude oil contract gained 5.4% on Tuesday to $81.96 per barrel, hitting the highest since July 2024 at one point, taking gains since Friday to 12%. European gas prices are up 70% since the end of last week.

The U.S. dollar index, which measures the greenback's strength against a basket of six currencies, was steady at 99.103, its strongest since November 28.

Against the yen, ‌the dollar was down 0.1% at 157.555 yen.

Against the Chinese yuan, ⁠in offshore trade the dollar was down 0.1% at ​6.9139 yuan ahead of the release of official and private sector PMI data for February.

The Australian dollar was down 0.1% at $0.7028 after GDP data for the fourth quarter beat expectations. ​The New Zealand dollar ‌was down 0.1% at $0.5886, as the British pound slipped 0.1% to $1.3340.

Bitcoin ⁠was up 0.7% at $68,533.21, while ​ether rose 1.1% to $1,990.99. (Reporting by Gregor Stuart Hunter; Editing by Jacqueline Wong)