Strong US jobs data boost dollar and Fed hike expectationsRising Middle East tensions push oil prices higherGold falls as rising yields and strong dollar reduce its appealWall Street tumbles, led by tech and AI stocksUS Labor Market Remains Astoundingly StrongThe US dollar skyrocketed against all other major currencies on Friday after the better-than-expected US jobs data encouraged market participants to increase their Fed rate hike bets. The greenback remained on the front foot at the start of this week, gaining against some peers, albeit at a slower pace, and holding near its Friday close against others.Friday’s US jobs report revealed that the US economy added 172k jobs in May, confounding expectations of a much more modest 85k gain. What’s more, April’s figure was revised up to 179k from 115k initially, while the unemployment rate held steady at 4.3%.The report painted a picture of a labor market astoundingly strong, considering the ongoing conflict in the Middle East and the resulting energy crisis, giving the Fed the green light to proceed with a tighter monetary policy stance. According to Fed funds futures, the market is now fully penciling in 30bps worth of Fed hikes by December. This means that a 25bps increase is more than fully priced in for this year, while the chance of it being delivered in September is now more than 50%.With the upcoming meeting being the first of the new Chair, Kevin Warsh, it is unlikely that the Fed will press the hike button before September. After all, Warsh was appointed by US President Trump, on the premise that he holds a less hawkish view than his predecessor Jerome Powell.Next week, the spotlight is likely to turn to the US CPI data, where another month of hotter-than-expected prints could drive the probability of a September hike higher and thereby add more fuel to the dollar’s engines.Escalating Middle East Conflict Dashes Peace HopesIn the Middle East, tensions flared up once again, prompting oil prices to open with a positive gap today and continue higher during the Asian session. Although oil slid on Friday, perhaps pressured by the dollar’s rally, today’s rebound is a clear signal that hopes about a potential reopening of the Strait of Hormuz have vanished.On Sunday, Iran fired missiles at Israeli military targets in retaliation for Israel’s attacks on Lebanon. Israel responded by attacking Iran, although US President Trump said he asked Israeli Prime Minister Netanyahu not to do it.With truce and Hormuz-reopening hopes being wiped out, inflation fears are likely to remain elevated. Thus, the slightest data point suggesting further acceleration in consumer prices could lead to even stronger rate hike bets.Gold Drops, Yen Keeps Flirting With InterventionGold also felt the heat of the strong US labor market report and the bolstering expectations of higher interest rates. The precious metal was sold from slightly below the 4500 zone and dropped below the 200-day moving average and the low of March 26. With the only positive catalyst being central bank buying and everything else suggesting further declines, it may be a matter of time before gold challenges the March 23 low at 4,100.The yen was also no match for the dollar’s strength, with dollar/yen poking its nose above 160.00 again. The pair recovered all the loses made just over a moth ago after Japanese authorities intervened with 11.7 trillion yen. The BoJ is largely expected to raise interest rates at its upcoming meeting, but that is not necessarily a helping hand for the yen, as the move is already priced in.For the yen to stage a meaningful recovery, an intervention episode alone, even accompanied by an upcoming rate hike, may not be enough. The BoJ may have to appear even more hawkish, signaling additional increases in borrowing costs for the months to come.May Jobs Report Results in Tech BloodbathOn Wall Street, all three of its main indices tumbled, with the tech-heavy Nasdaq losing more than 4%, as high-growth tech stocks were pushed off the cliff after the May NFP report bolstered bets of faster rate hikes by the Fed.The main drivers of the tumble were chip stocks and other AI-related shares that were on a rally mode last month, driving the S&P 500 and the Nasdaq to record high after record high.That said, positioning may have played a big role as an overcrowded and overbought semiconductor market prompted investors to lock in some profits and look for better opportunities to re-enter the market at more attractive levels.