The New Zealand dollar dropped to $0.585 on Monday, its lowest level in more than six weeks, as escalating hostilities in the Middle East continued to dampen risk appetite. The conflict has now entered a second week with little indication of de-escalation, prompting investors to reduce exposure to risk-sensitive currencies such as the kiwi. This also raised concerns about a surge in oil prices, which could fuel global inflationary pressures. On the domestic policy front, markets are pricing in an 80% probability that the Reserve Bank of New Zealand will raise its cash rate in September, with about 40 basis points of total tightening expected this year. This outlook is notably more hawkish than the central bank’s own projections, which suggest that even a single rate increase this year is not fully assured.