The dollar headed towards a weekly loss on Friday while bonds remained under pressure, after global central bankers warned that the Middle East war ​could reignite inflation.

A dip in oil prices offered brief relief for markets, but trading stayed choppy and nerves frayed, highlighting how brittle investor confidence ‌remains.

Following a hectic week of monetary policy meetings across effectively the Group of Seven (G7) nations and others, the key takeaway for investors has been the prospect of a more aggressive policy tightening path.

Traders are no longer expecting a Federal Reserve rate cut this year, futures imply a 40% chance of a hike from the Bank of England next month, and sources said the European Central Bank may need to begin discussing rate increases in April ​and possibly tighten policy in June .

“There’s a lot of value in the signal,” said Vishnu Varathan, Mizuho’s head of macro research for Asia ex-Japan, of the hawkish ​rhetoric from central banks this week. “It’s a messaging to markets that we are on top of this, you don’t need to send ⁠yields unnecessarily higher, because… the yields are already starting to do the work for them.”

Read: Italy, Germany and France offer help with Hormuz only after ceasefire

A rout in global bonds pushed yields to multi-month highs on Thursday, though the selloff ​showed some signs of abating in Asia on Friday.

Trading of cash US Treasuries was closed due to a holiday in Japan, but futures edged marginally higher. The yield on the two-year ​US Treasury note, which typically reflects near-term rate expectations, had jumped as much as over 20 basis points in the previous session.

Germany’s bund futures were up 0.06%, while French OAT futures rose 0.16%.

Still, for the month thus far, Germany’s two-year yield has already risen some 56 bps. Yields on two-year British gilts have jumped 88 bps.

Energy chokehold

Brent crude futures were down 1.6% at $106.90 a barrel on Friday while ​US crude fell 1.9% to $94.32 per barrel, after leading European nations and Japan offered to join efforts to secure safe passage for ships through the Strait of Hormuz and the ​US outlined moves to boost oil supply.

But both remained well above levels prior to the US-Israeli war on Iran, having risen more than 40% this month.

Natural gas prices have also soared, with those in Europe ‌skyrocketing as ⁠much as 35% on Thursday, as Iranian and Israeli strikes targeted some of the Middle East’s most important gas infrastructure. This prompted US President Donald Trump to tell Israel not to repeat its attacks on Iranian natural gas infrastructure.

“Even if the US leaves (the conflict), Israel might not leave, and there may still be some strikes and Iran will retaliate, maybe at a lower volume,” said Alicia Garcia-Herrero, chief Asia-Pacific economist at Natixis. “But this means that the Gulf will still be under pressure… so oil prices will not go back to $60, they will maybe stay ​at $90, at least until the end of ​the year. So the shock is already ⁠unavoidable.”

On the equities front, MSCI’s broadest index of Asia-Pacific shares outside Japan swung between losses and gains to be 0.2% lower, though was set for a weekly gain of 0.3%, snapping two straight weeks of losses.

Nasdaq futures and S&P 500 futures added about 0.1% ​each. EUROSTOXX 50 futures were up 0.7%, while FTSE futures rose 0.15%.

Dollar falls from peak

The dollar was set for a weekly loss ​of roughly 1%, as ⁠the Fed is now seen as the only major central bank that is not expected to raise rates this year.

That kept the euro holding to most of Thursday’s 1.2% gain to fetch $1.1560, while sterling dipped 0.17% to $1.3408, after a 1.3% rise overnight.

Read More: Gold, silver prices fall further in global and local markets

Even the yen, which was on the cusp of 160 per dollar in the previous session, found some support and stood at ⁠158.36. The Japanese ​currency was also helped by some hawkish comments from Bank of Japan Governor Kazuo Ueda on Thursday, after the ​central bank held rates steady but maintained its bias for tighter monetary policy.

Yusuke Miyairi, Nomura’s JPY FX and rates strategist, said that while Ueda may have left the door open to a rate hike in April, it ​remains “premature” to conclude that such a move would be coming.

In precious metals, spot gold was up 1% at $4,693 an ounce.