The U.S. dollar is making a comeback at precisely the moment global markets are becoming more nervous.

The greenback climbed to a nearly two-week high on Tuesday as oil prices surged, U.S. Treasury yields jumped and traders increased their bets that the Federal Reserve will raise interest rates. The dollar's strength pushed the euro toward a one-month low and pressured several major currencies.

At first glance, this might look like another routine currency-market move.

It is not.

The dollar's latest rally is being powered by three major forces that could reinforce one another:

higher oil prices, higher U.S. interest rates and higher Treasury yields.

Together, those factors are changing the global financial landscape.

The benchmark 10-year Treasury yield climbed to around 5.03%, its highest level since 2007, while oil approached $108 a barrel after fresh geopolitical disruptions in the Middle East. Markets were pricing roughly a 94% probability of a Federal Reserve rate hike.

That combination creates an unusually powerful support system for the U.S. currency.

The relationship between oil and the dollar is not always straightforward.

Normally, higher oil prices can hurt the United States by increasing inflation and reducing household purchasing power.

But when the Federal Reserve responds by keeping interest rates higher, the currency can benefit.

That is essentially what the market is pricing now.

Oil prices have surged after attacks involving Yemen's Houthi forces and delays in Gulf-Iran talks increased concerns about regional energy supplies and shipping. Brent crude has moved toward $107.70 a barrel.

Higher energy prices increase inflation risk.

That makes traders more confident that the Fed cannot afford to ease monetary policy aggressively.

Higher U.S. rates make dollar-denominated assets more attractive.

Foreign investors then have greater incentive to hold Treasuries and other U.S. investments.

The dollar strengthens.

That is the chain reaction now developing.

Perhaps the biggest driver of the dollar rally is not oil itself.

It is the bond market.

The 10-year Treasury yield has surged above 5%, reaching the highest level since 2007.

That creates a powerful yield advantage for dollar assets.

Investors around the world constantly compare expected returns across currencies.

If U.S. government bonds offer substantially higher yields while the European Central Bank or Bank of England maintains a less aggressive policy stance, capital can flow toward dollar-denominated securities.

The currency market responds.

That is one reason the euro has fallen toward $1.153 and sterling has moved near $1.34.

The Federal Reserve is widely expected to raise interest rates this week.

CME-linked market pricing puts the probability of a hike around 94%.

But the market is not just betting on one rate increase.

It is trying to determine whether the Fed will signal additional tightening.

That distinction could decide how much further the dollar can rise.

If Federal Reserve officials indicate that inflation remains dangerous, traders may price additional hikes.

That would likely increase Treasury yields further and create another tailwind for the dollar.

If the Fed instead signals that the move is largely a one-time response to temporary inflation pressures, some of the dollar's recent gains could reverse.

The current environment is difficult because inflation pressures are coming from several directions.

Energy prices are rising.

U.S. consumer-price data have remained firmer than expected.

Long-term bond yields are climbing.

And investors are beginning to expect higher rates for longer.

That combination suggests the Federal Reserve may have less flexibility than markets previously assumed.

For the dollar, that is bullish.

For many other economies, it is uncomfortable.

A stronger U.S. dollar can create serious problems for emerging-market economies.

Many countries have substantial dollar-denominated debt.

When the dollar rises, the local-currency cost of servicing that debt increases.

Imported commodities also become more expensive.

Oil is especially important.

Countries that rely heavily on energy imports can face a double hit:

They pay more for crude because oil prices rise.

Then they pay even more because the dollar strengthens.

That combination can put significant pressure on inflation and trade balances.

The yen weakened during the latest dollar move, although market sentiment around Japan's currency remains complicated.

Japan is in a particularly difficult position because its domestic interest-rate environment remains dramatically different from that of the United States.

If U.S. yields continue rising while Japanese yields lag, the interest-rate gap can encourage investors to favor dollar assets.

That can put downward pressure on the yen.

But Japan is also moving away from its old era of ultra-easy monetary policy, making the currency's outlook unusually uncertain.

The result is a battle between two forces:

Higher U.S. yields support the dollar.

Changing Japanese policy supports the yen.

The direction of the gap will matter.

China's currency has been relatively stable despite the broader dollar rally, helped by improving industrial conditions and policy management.

That matters because the yuan's stability can reduce some pressure across emerging-market currencies.

But China also faces the problem of weaker global demand if higher interest rates and energy prices slow major economies.

A strong dollar can make global financial conditions tighter even when the Federal Reserve does not change rates dramatically.

That is because so much international trade and debt is priced in dollars.

The dollar's strength is particularly relevant for Bitcoin.

Cryptocurrency markets often benefit from expectations of easier monetary policy and abundant liquidity.

A stronger dollar can work in the opposite direction.

It signals tighter financial conditions and can reduce demand for riskier assets.

That is especially important right now because Bitcoin is simultaneously facing uncertainty around the U.S. CLARITY Act and a potentially hawkish Federal Reserve.

One catalyst could push crypto higher.

Another could pull it lower.

The dollar sits in the middle of both trends.

Gold investors are also watching the dollar carefully.

A stronger greenback typically makes gold more expensive for holders of other currencies.

Higher Treasury yields also increase the opportunity cost of holding non-yielding gold.

Those forces can pressure the precious metal.

But geopolitical tensions and inflation fears can increase demand for safe-haven assets.

That creates a tug-of-war.

The dollar may strengthen because investors are worried.

Gold may also strengthen because investors are worried.

The two assets do not always move in opposite directions.

There is a scenario in which the current trend feeds on itself.

Higher oil prices raise inflation fears.

Inflation fears increase expectations for higher Fed rates.

Higher Fed expectations push Treasury yields higher.

Higher yields attract foreign capital.

Foreign capital strengthens the dollar.

A stronger dollar makes U.S. assets more attractive.

That brings even more capital into the United States.

Such cycles can be powerful.

But they do not last forever.

Eventually, a stronger dollar can hurt U.S. exporters, tighten global financial conditions too much or create economic stress abroad.

That can eventually reduce the need for even tighter policy.

The immediate focus is the Federal Reserve.

Investors want to know whether the central bank sees the inflation problem as temporary or persistent.

They also want to know whether the 5% Treasury yield is likely to remain elevated.

And they want to know how policymakers will respond if oil stays above $100 for an extended period.

Those answers will shape the dollar's next major move.

The currency is not rising simply because investors suddenly love the United States.

It is rising because the global market is assigning a higher value to dollar-based yield and safety at a moment of geopolitical and inflationary uncertainty.

The dollar's move to a two-week high may look modest.

But the forces behind it are not.

Oil is near multi-month highs.

Treasury yields are at levels not seen since before the global financial crisis.

The Fed is expected to tighten policy.

And investors are reassessing the inflation outlook.

That is a powerful combination.

For global markets, the message is clear:

The cost of dollar liquidity is rising again.

And when the world's reserve currency becomes stronger at the same time that U.S. borrowing costs jump above 5%, the effects do not stop at the foreign-exchange market.

They reach stocks.

They reach bonds.

They reach commodities.

They reach emerging markets.

And increasingly, they reach crypto.

The dollar's latest rally may therefore be less about currency strength than about a broader repricing of the global financial system.