The US Dollar Index (DXY) remained steady near 100.93 on Tuesday after touching its highest level in nearly a week, as investors balanced renewed geopolitical risks against expectations that the Federal Reserve will keep interest rates unchanged this month.

Although markets continue to price in a pause at the upcoming Fed meeting, rising oil prices and escalating tensions in the Middle East have helped underpin demand for the US dollar.

Oil markets remain highly volatile as the conflict involving the US, Iran and Iran-backed Houthi forces continues to threaten key energy shipping routes.

At the same time, reports that Tehran has received a 10-day ceasefire proposal have offered hope that the conflict may not escalate further, limiting broader gains in the greenback.

As Rodrigo Catril, Senior Currency Strategist at National Australia Bank, said:

"There is the hope for easing in a little bit of tensions and we'll hit a pause button at some stage. It's all still very volatile."

The recent rebound in oil prices is also reshaping interest-rate expectations.

Higher energy costs could slow the decline in inflation, prompting investors to reconsider how long the Federal Reserve may need to keep monetary policy restrictive.

While markets now assign only a 17% probability of a rate hike at the July meeting, expectations for a September hike have risen to around 63%, according to CME FedWatch.

Meanwhile, US Treasury yields remain elevated, with the 10-year yield holding near 4.59%, providing additional support for the dollar.

Technically, the Dollar Index continues to hold above the psychologically important 100 level, keeping the broader recovery intact.

As long as the index remains above this support, buyers are likely to retain near-term control.

A sustained move above the recent high near 101.00 could strengthen bullish momentum and expose the next resistance zone around 101.50.

On the downside, a break below 100.00 would weaken the current recovery and shift attention toward the 99.50 support area.

For now, the US dollar is being supported by a combination of safe-haven demand, elevated Treasury yields and renewed inflation concerns linked to higher oil prices.

Whether the index can extend its recovery will likely depend on developments in the Middle East and whether rising energy prices begin to reshape expectations for Federal Reserve policy once again.