(Updates prices to Asia afternoon)

* Dollar index hits highest since May 2025

* Yen recovers on intervention threats

* AUD, NZD break down to multi-month lows

SINGAPORE, March 31 (Reuters) - The dollar headed for

its biggest monthly gain since July on Tuesday and stands out as

the strongest so-called safe asset as war in the Middle East has

set oil prices surging, nearly everything else sinking and

raised the risk of global recession.

A Wall Street Journal report that U.S. President Donald Trump is

willing to end attacks on Iran without forcing open the Strait

of Hormuz, according to unnamed officials, set crude slightly

lower in Asia trade but hardly budged the dollar.

It pushed 1% higher on South Korea's won to 1,534 won,

levels touched only in the wake of the global financial crisis

in 2009 and the Asian financial crisis in 1997 and 1998.

The euro was kept below $1.15, while sterling and the

Australian and New Zealand dollars were pinned to multi-month

lows.

Renewed threats of intervention from Tokyo spared extra selling

pressure on the yen, which touched its weakest since July

2024 on Monday and trades at 159.52 per dollar.

The dollar has been supported by the U.S. status as an energy

exporter, by rising U.S. Treasury yields and by investors'

flight to cash over the past month of conflict, with Asian

currencies suffering some of the largest losses.

"Barring any clear, conciliatory messages from the Iranian

side, it is hard to see the dollar handing back this month's

gains anytime soon," said Chris Turner, ING's global head of

markets.

DOLLAR STANDS TALL

Bonds, gold and safe-haven currencies such as the yen and

Swiss franc have all fallen through March, as the energy shock

delivered by $100-a-barrel crude oil exposed weaknesses.

The U.S. dollar index, meanwhile touched its highest

since last May on Monday at 100.61 and, last sitting at 100.47,

is up 2.9% through March, its sharpest monthly rise since July.

A looming inflation spike has hurt bonds. A positioning clearout

has sunk gold, while the energy shock hurts Japan's terms of

trade and Swiss authorities have indicated they would intervene

to stem any steep gains for the franc.

The dollar is up nearly 4% for the month on the franc

at 0.80 francs and has broken resistance levels for the Aussie

and kiwi in recent sessions. The kiwi, down six straight

sessions, is on the verge of breaking below 57 cents.

The Aussie has fallen for eight sessions and hit a a

two-month low of $0.6834, down 3.7% for March and under major

support at $0.6897. Sterling hovered just above $1.32.

The main risk to the dollar might come from labour data due out

in the liquidity vacuum of Good Friday, or, warned strategists

at Union Bancaire Privee, a breakdown in the relationship that

usually sees the dollar higher if stocks fall.

"FX - equity correlations have been quite stable since the

outbreak of the conflict, though this could change if markets

move to price in a more prolonged conflict - with still

uncertain outcomes," they said.

March inflation data is due later in the session in Europe

and is likely to rip back above the European Central Bank's 2%

target.

(Reporting by Tom Westbrook in Singapore; Editing by Lincoln

Feast.)