The Australian dollar held its recent decline around the $0.72 level after pulling back from multi-year highs, leaving it on track for a broadly flat performance over the week. Attention remains on geopolitical developments, as renewed clashes between the US and Iran weakened hopes for a near-term peace agreement, boosting the safe-haven US dollar. The latest escalation followed US attempts to exit a conflict now in its third month, while awaiting Iran’s response to its proposal to reopen the Strait of Hormuz, a vital waterway for energy flows. The near-closure of the strait and the resulting energy price shock have fueled concerns about rising inflation, which could keep interest rates higher for longer. In Australia, markets are pricing around a 20% chance of another rate hike in June by the Reserve Bank, after 75 bps of tightening to 4.35% over the past three meetings. The probability rises to about 68% for August, with a terminal rate near 4.60% almost fully priced in by September.