Euro Weakens as Iran Conflict Fuels Growth Concerns
The euro declined against the U.S. dollar on Monday, as investors grew increasingly concerned about the economic impact of a prolonged U.S.-Israeli conflict with Iran. At the same time, the Japanese yen gained strength after officials in Japan intensified warnings about potential currency intervention.
Trump Escalates Rhetoric Over Strait of Hormuz
President Donald Trump warned that Iran’s energy infrastructure, including oil facilities and power plants, could be targeted if Tehran does not reopen the Strait of Hormuz. His comments followed Iran’s rejection of U.S. peace proposals as “unrealistic” and continued missile strikes against Israel.
Rising Oil Prices Add Pressure on Global Growth
The surge in oil prices has heightened fears of inflation, but investors are increasingly shifting their focus toward economic growth risks. Higher energy costs are expected to weigh on consumer spending and slow down economic activity if the conflict continues.
According to Noel Dixon, global macro strategist at State Street Global Markets, markets are beginning to reassess the broader growth outlook, particularly for more vulnerable regions such as the UK and the European Union.
Euro and Sterling Decline Against Stronger Dollar
The euro dropped 0.44% to $1.1457, while the British pound fell 0.57% to $1.3181, briefly hitting its lowest level since late November.
Meanwhile, the U.S. dollar index, which tracks the greenback against a basket of major currencies, rose 0.22% to 100.53, reaching its highest level in over a month.
Dollar Gains on Safe-Haven Demand
The U.S. dollar has benefited from increased safe-haven demand amid geopolitical uncertainty. Additionally, the United States holds a relative advantage as a net energy exporter, making its economy more resilient to rising oil prices compared to other regions.
Federal Reserve Signals Patience on Rate Decisions
Federal Reserve Chair Jerome Powell stated that the central bank can afford to wait and assess how the Iran conflict impacts inflation and economic conditions. He noted that policymakers often look beyond temporary shocks such as energy-driven price spikes.
Market expectations have shifted significantly, with traders no longer anticipating rate cuts this year. Instead, current pricing suggests that interest rates may remain unchanged through the end of the year.
Japanese Yen Strengthens on Intervention Warnings
The Japanese yen gained 0.42% against the dollar, strengthening to 159.63 after previously weakening past the key 160 level.
Japan’s top currency official, Atsushi Mimura, warned that authorities may take decisive action if speculative movements continue in currency markets. Bank of Japan Governor Kazuo Ueda also indicated that exchange rate movements could influence future monetary policy decisions, particularly if they contribute to inflation.
Other Currencies and Crypto Market Moves
Elsewhere, the Australian dollar fell to a two-month low of $0.6831, while the New Zealand dollar dropped to a four-month low of $0.5698.
In the cryptocurrency market, Bitcoin slipped 0.34% to $66,332.38, reflecting ongoing caution across risk-sensitive assets.
