• US Dollar Index climbs to a five-day high as renewed US-Iran tensions support safe-haven demand.
• Rising Oil prices lift September Federal Reserve rate hike expectations.
• Traders turn their attention to the June FOMC Minutes.

The US Dollar Index (DXY) consolidates modest gains on Wednesday as traders assess renewed tensions between the United States and Iran and the potential economic fallout. At the time of writing, the index, which tracks the Greenback's value against a basket of six major currencies, is trading around 101.20, hitting a five-day high.

The US Dollar (USD) strengthened after US President Donald Trump declared that the ceasefire deal with Iran was "over." However, Reuters later reported, citing a source familiar with the talks, that Trump did not repeat those remarks during the closed NATO leaders' meeting.

Tensions escalated after renewed fighting between the United States and Iran overnight, following attacks on commercial vessels near the Strait of Hormuz. Trump warned that the US would “probably hit them again tonight” and added that “we may take over Kharg Island.”

Meanwhile, Iran's Press TV, citing an informed source, reported that Tehran would close the Strait of Hormuz in the event of any fresh attacks.

The latest flare-up has pushed Oil prices higher, reviving inflation concerns. West Texas Intermediate (WTI) crude Oil is trading around $74.50 per barrel, up more than 8% so far this week.

According to the CME FedWatch Tool, markets are now pricing in a 68% probability of an interest rate hike at the September meeting, up from 58% a day earlier.

Attention now turns to the June Federal Open Market Committee (FOMC) meeting minutes, due later in the American session at 18:00 GMT, for fresh clues on the Federal Reserve's (Fed) interest rate path.

ING FX strategist Francesco Pesole wrote in a note, "Today’s minutes will clarify how serious members are about the possibility of rate hikes. Based on post-meeting communication, we see limited risk of a dovish surprise in the minutes."

Pesole added that he expects the minutes to "cement the hawkish message" and support the US Dollar, although he does not expect them to trigger a major repricing of interest rate expectations following last week's softer US jobs report.

On the US Dollar Index, Pesole said he expects the DXY to remain "mostly rangebound in the very near term," while seeing upside risks toward the 101.50-102.00 area unless large-scale intervention by Japanese authorities triggers a correction.