TOKYO/LONDON - The dollar rose on Monday ​as escalating retaliatory threats in ⁠the Middle East conflict sent stocks tumbling and lifted demand for safe-haven assets. Hopes for an off-ramp to hostilities dimmed over the weekend, with ‌U.S. President Donald Trump threatening to strike Iran's electricity grid and Tehran vowing to hit back at its neighbours' infrastructure. The head of the International Energy Agency, meanwhile, said ​the crisis is worse than the two oil shocks of the 1970s put together.

"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." The dollar index, which measures the ⁠U.S. currency against a basket of peers, rose 0.6% to 100.12.

The gauge on Friday notched its first weekly decline since the start of the war, as the inflationary effects of surging oil prices prompted central banks to turn hawkish, supporting other currencies. The euro fell 0.7% to $1.149 on Monday. Meanwhile, the yen fell around 0.2% to 159.6 per dollar, weakening back toward the key 160 per dollar level that puts traders on alert for potential intervention. Japan's top currency ​diplomat Atsushi Mimura said ‌the government is prepared ⁠to take all measures to ⁠tackle volatility in currencies, adding it could be linked to speculative trade in oil futures. Sterling weakened 0.6% to $1.327, paring some of an earlier drop as traders moved to ​price in four interest rate hikes from the Bank of England this year.

The conflict continued to rage ‌on Monday, with Israel announcing wide-scale strikes on Tehran, while Saudi Arabia said two ballistic missiles had ⁠been launched at Riyadh. Trump issued his latest threat to Iran on Saturday, less than a day after signalling the U.S. might be considering winding down the conflict. Iran said that the Strait of Hormuz shipping lane for oil would remain closed.

"Oil prices remain well-supported, with Brent still above $110 per barrel, and a sell-everything mood in markets affecting equities, bonds and precious metals," said Francesco Pesole, FX strategist at lender ING.

"This is an ideal environment for the dollar." Major equity indexes across Europe and Asia tumbled, with Japan's Nikkei down as much as 5% at one point. U.S. stock futures also fell. The Australian dollar, often seen as a proxy for how investors are feeling about global growth, fell 1.3% versus the greenback to $0.693.

Inflation concerns hit global debt markets, with the 10-year U.S. Treasury yield rising to a near eight-month high of 4.429%.

Before the U.S.-Israeli war ‌on Iran began in late February, investors had priced in two cuts by the Federal ⁠Reserve this year. But even one cut is now considered a distant prospect, and other major central ​banks are turning more hawkish.

"If markets price a U.S. tightening cycle, the USD will lift strongly against all currencies in our view," Joseph Capurso, head of international economics at the Commonwealth Bank of Australia, wrote in a note. The European Central Bank kept rates on hold on Thursday, but warned of inflation driven by ​energy prices. The Bank ‌of England also kept rates steady, while the Bank of Japan left the door open to a hike as ⁠soon as April. In cryptocurrencies, bitcoin rose 0.65% to $68,630.