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Currency Markets · Geopolitics · Oil Prices · US Dollar
The US dollar and Brent crude oil prices surged to $106-$108 a barrel, respectively, as escalating fears of war, particularly involving Iran, drove investors towards safe-haven assets, while the Euro and British Pound experienced significant declines.
The US dollar extended gains for a third straight session, with its 'petro-dollar' bid enduring due to the US economy's structural shift to a net energy exporter, meaning higher oil prices now raise US terms of trade, as highlighted by a Bank for International Settlements paper. The Euro fell 0.3% against the USD and for a third consecutive day, with EUR/USD trading in a 1.14-1.15 zone, as conflicting signals from US and Iran regarding de-escalation complicated market sentiment.
The British Pound, despite earlier resilience from hawkish Bank of England rate hike expectations, erased gains, with GBP/USD down around 1%, as weak domestic data, including a sharp plunge in UK consumer confidence and declining retail sales, collided with elevated energy prices and geopolitical uncertainty, increasing the UK's stagflation risk profile. Without clear de-risking signals, market positioning remains defensive, suggesting continued vulnerability for the Euro and Pound.
Iran Tensions Lift Dollar, Oil Prices(current)
The euro fell against the dollar and looked vulnerable as investors seemed more minded to brace for an escalation in the war, rather than a ceasefire, ING said.
