Dollar Holds Near 6-Week Highs on Inflation Concerns While US Equities Rebound Ahead of Nvidia Earnings

EcoPulse24 | DUBAI

The US dollar index held steady at 99.4 on Wednesday, hovering near its highest levels since early April, as markets weighed sustained inflationary pressures stemming from the ongoing closure of the Strait of Hormuz, while US equities posted modest gains ahead of a closely watched earnings report from Nvidia after the closing bell.

Dollar Supported by Hormuz-Linked Inflation

The dollar index was little changed at 99.4, supported by concerns over rising inflation and high interest rates. The Strait of Hormuz remains largely closed, keeping oil prices approximately 50% above pre-war levels and fuelling concerns over sustained inflationary pressures. Higher energy costs are expected to continue adding upward pressure to consumer prices, likely forcing central banks to maintain tighter monetary policy or potentially resume interest rate hikes, while also complicating fiscal conditions across major economies.

The Federal Reserve is still expected to keep the federal funds rate unchanged for the remainder of 2026, although market-implied odds of a rate hike in December currently stand at approximately 50%. The greenback was little changed against major currencies. Investors were awaiting the release of the latest Federal Open Market Committee (FOMC) minutes later in the day for further insight into policymakers' outlook on inflation and interest rates.

US Equities Rebound Despite Treasury Pressure

US equities were mostly higher on Wednesday, with the S&P 500 and the Nasdaq 100 each rising 0.4%, halting a three-day losing streak, while the Dow Jones Industrial Average was flat. The rebound in equities took place despite a continued selloff in long-term US Treasuries, which remained under pressure from concerns that high energy prices will spread through core sectors of the economy and force the Federal Reserve to raise rates.

Nvidia gained 1% during the session, with premarket gains of 1.5% recorded earlier in the day, as investors positioned ahead of the company's quarterly earnings report due after the closing bell. The chip giant is widely expected to confirm sharp growth in earnings and orders, but the tone of its forward guidance is expected to have a significant impact on the broader technology sector. AI spending carried US investment growth last quarter and is expected to underpin productivity growth and infrastructure expenditure in coming years.

On the earnings front, TJX and Target were both higher following their respective results. Microsoft and Oracle each dropped 1.5%.

Market Context

The combination of a strong dollar, elevated energy prices, Treasury market pressure, and anticipation around Nvidia's guidance reflects the intersection of two dominant market forces in May 2026: the macroeconomic consequences of the Hormuz closure on inflation and monetary policy expectations, and the structural significance of AI infrastructure investment as a pillar of US corporate earnings and productivity growth.

EcoPulse24 Analysis

The market configuration on Wednesday tells a coherent story for Gulf investors. Hormuz-driven oil prices at 50% above pre-war levels are no longer just an energy story - they are now embedded in US monetary policy expectations, with a 50% market-implied probability of a December Fed rate hike.

That transmission mechanism - from Gulf supply disruption to global interest rate trajectory - is precisely the macro linkage that EcoPulse24's institutional readership tracks.

A Fed rate hike in December would strengthen the dollar further, tighten dollar-pegged Gulf monetary conditions, and raise the cost of sovereign borrowing across GCC bond markets. Nvidia's guidance after the bell will add a second variable: if AI infrastructure spending is confirmed as accelerating, it will sustain the capital expenditure cycle that has been absorbing global liquidity despite the inflationary environment.