The Bloomberg Dollar Spot Index was flat midday Monday after climbing as much as 0.7%, extending last week’s 1.3% advance as oil rallied above $100 a barrel over the weekend. Both oil and the dollar pared gains on news that Group-of-Seven countries were ready to take steps to cap soaring energy costs even as the group said they’re not ready to release stockpiles yet.

“Oil is going to be what everyone keeps their eyes on this week,” said Andrew Hazlett, a foreign-exchange trader at Monex Inc. “The dollar is getting a boost from those higher prices since the US is the world’s largest oil producer, but there is still some degree of safe-haven flow coming the dollar’s way as well.”

The greenback has attracted most of the haven bid since the war erupted on Feb. 28. The Swiss franc and the Japanese yen weakened substantially as both nations are energy importers and the euro dropped as well, highlighting how vulnerable the region is to energy supply disruptions. Treasuries, another traditional safe asset, were weighed down by reignited inflation fears from the spike of oil.

The surge in crude prices is curbing the odds of Federal Reserve interest rate cuts this year, further supporting the dollar. Traders now don’t expect a full quarter-point reduction until September at the earliest from July previously. Money markets have flipped to bet on rate hikes by the European Central Bank and briefly priced a quarter-point hike by the Bank of England. That’s seen the region’s bonds take the brunt of a global selloff.

In the options market, a frenzy of trading is also favoring the greenback. The premium on dollar strength in so-called risk reversals is the highest in over three years.

What Bloomberg Strategists say…

“Since hostilities broadened at the turn of the month, the correlation between the dollar basket and crude has flipped decisively positive, a marked regime shift. The underlying logic is not just about cyclical energy leverage, but about the dollar’s structural role in the system. Oil is priced in dollars, global trade is financed in dollars and a vast stock of offshore liabilities is denominated in the greenback.” —Brendan Fagan, Macro Strategist

Reporting by Anya Andrianova and Vassilis Karamanis