Dollar wobbles as foggy outlook for Iran war keeps investors on edge

The dollar eased on Wednesday as traders awaited ​cues on what comes next in the US-Israeli war on Iran, with mixed messages on a resolution to the conflict keeping investor ‌sentiment frail.

Global markets have been betting that US President Donald Trump will seek to end the conflict soon, but Trump has also repeatedly threatened to hit Iran hard over moves to stop the flow of energy supplies through the Strait of Hormuz.

The dollar, which surged as the war sent oil prices soaring, has given up some of those gains on hopes ​of a swift resolution, but analysts remain sceptical of the conflict ending soon.

"We expect the war to run for months, not weeks, ​while acknowledging the high level of uncertainty," said Kristina Clifton, senior currency strategist at Commonwealth Bank of Australia.

The euro ⁠firmed 0.18 percent to $1.163175, inching away from the three-month low it touched on Monday. Sterling was 0.25 percent higher at $1.3449. The yen was at 158.14 per US ​dollar, near a seven-week low touched earlier this week.

The dollar index, which measures the US unit against six other rivals, eased to 98.773, not far ​from the three-month top hit on Monday.

As the war stretched into its 12th day, the US and Israel traded air strikes with Iran's military across the Middle East. The besieged Tehran government warned its state security forces were ready with "fingers on the trigger" to confront any revival of anti-government protests.

The fast-evolving developments have left traders grappling with how to ​best price the risk.

"Traders are largely sitting on their hands and waiting for further news and greater clarity so that risk can be priced ​more efficiently," said Chris Weston, head of research at Pepperstone.