Forex News

• Dow Jones futures fall as oil surge from Strait of Hormuz disruption raises inflation risks.
• Iran attacks energy sites; Fujairah strike heightens geopolitical tensions and supply concerns.
• Fed expected to hold rates at 3.50%–3.75% as inflation fears delay easing.

Dow Jones futures decline 0.27% to trade near 46,850 during European hours ahead of the US regular market open on Tuesday. S&P 500 and Nasdaq 100 futures fall 0.50% and 0.58% to trade near 6,670 and 24,530 at the time of writing.

US stock futures declined as a renewed surge in oil prices reinforced inflation concerns, driven by escalating supply risks from the Middle East. Crude prices jumped sharply as the Strait of Hormuz remains largely shut, heightening fears of prolonged disruptions to global energy flows.

Tensions in the region intensified after Iran stepped up attacks on critical energy infrastructure. A recent drone strike sparked a fire at the UAE’s Fujairah Oil Industry Zone, though no injuries were reported. The incident added to market anxiety over the stability of key oil transit and storage hubs.

Meanwhile, geopolitical divisions have deepened. Several countries have resisted calls from US President Donald Trump to deploy naval escorts for tankers passing through the strait. Trump criticized Western allies, accusing them of failing to reciprocate years of US support, further straining diplomatic ties.

Financial markets are also adjusting to the inflationary implications of rising oil prices. Elevated energy costs are seen as a key risk to price stability, complicating the outlook for monetary policy. Expectations for near-term Federal Reserve (Fed) rate cuts have weakened as inflation concerns resurface.

According to the CME FedWatch Tool, traders widely expect the Fed to keep its benchmark interest rate unchanged in the 3.50%–3.75% range at its upcoming meeting due on Wednesday. If maintained, this would mark a second consecutive pause, signaling caution amid growing economic and geopolitical uncertainty.

Societe Generale strategists Michael Haigh, Ben Hoff and Jeremy Sellem, highlights rapidly falling Oil flows through the Strait of Hormuz and accelerating shut‑ins. With limited pipeline rerouting and Gulf refining outages, global product balances are tightening and prices are spiking, forcing a rebalancing through higher product prices and policy responses worldwide.

Hormuz disruption tightens global oil products

"Estimated flows through the Strait of Hormuz continue to fall fast. We estimate that flows are roughly 0.5 mb/d, meaning oil passing through the Strait is down by 19.5 mb/d relative to average flows. Accounting for redirection through regional pipes leaves around 17 mb/d of stranded oil."

"With exports stranded and limited pipeline-rerouting options, almost 2mb/d of Gulf refining capacity has been taken offline due to the constraints but also due to attacks on the infrastructure tightening global product balances resulting in spiking prices."

"Europe remains relatively insulated for now thanks to ongoing draws on its product inventories. The region holds nearly 70 million barrels of jet fuel across commercial and strategic tanks, enough to offset up to a 300 kb/d shortfall in Gulf‑sourced supply for several months and soften the initial impact. Even so, pressure is mounting rapidly across middle distillates—most notably diesel and jet—given the Gulf’s role as a major supplier to Europe, Africa and of course Asia."

"Tightness is also emerging in naphtha, which is vital for Northeast Asia’s petrochemical sector, and reduced LPG shipments from the UAE and Qatar are already lifting propane markets. As a result, the system is being forced to rebalance through higher product prices."

"Meanwhile, shut‑ins are accelerating rapidly, already nearing 7 mb/d and potentially pushing into double‑digit territory within days."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

ING’s Francesco Pesole argues that even under a severe and prolonged Gulf conflict, European gas prices are unlikely to revisit 2022 extremes, supporting a constructive medium-term view on EUR/USD. However, he warns that near-term downside risks remain around central bank meetings and Gulf headlines, with EUR/USD potentially dipping below 1.1450 before recovering later in the year.

Gas constraints support Euro fair value

"We have published a new set of energy price scenarios and their implications for rates and EUR/USD. In our baseline, intensive combat ends within two weeks, but lower‑intensity strikes could continue for several months, delaying the reopening of the Strait of Hormuz, which would not return to full capacity before June. This means a $91/b average for Brent in 2Q and $85/b in 3Q, in our estimates."

"A key point of our new scenario analysis is that gas prices are likely to remain elevated only in a severe and prolonged conflict. Even in that case, a return above 100 EUR/MWh in TTF looks to be off the cards, and 2022 swings would still dwarf those caused by this Gulf conflict."

"This conviction call continues to form the backbone of our upbeat view on EUR/USD into year-end, as capped gas prices mean a smaller impact on the eurozone terms of trade and, by extension, the euro’s medium-term fair value."

"In the near term, downside risks persist, and EUR/USD recovery on Monday may have short legs unless some headlines on ceasefire talks or NATO coordination on securing Hormuz start to appear."

"The sum of Fed and ECB meetings today returns a downside balance of risks for EUR/USD this week, in our view, and we could see the pair re-exploring sub-1.1450 before recovering, barring positive developments in the Gulf."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

• WTI surges more than 3% as the Strait of Hormuz remains largely shut on Tuesday.
• A drone strike sparked a fire at the UAE’s Fujairah Oil Industry Zone.
• US allies hesitate to deploy warships to escort tankers through the strait.

West Texas Intermediate (WTI) Oil price recovers its recent losses registered in the previous session, trading around $96.10 per barrel during the European hours on Tuesday. WTI price surged more than 3% at the time of writing, driven by renewed supply concerns as the Strait of Hormuz remains largely shut and US allies resist deploying warships to escort tankers through the vital chokepoint.

Iran has intensified attacks on regional energy infrastructure. A drone strike triggered a fire at the UAE’s Fujairah Oil Industry Zone, though no injuries were reported. Middle East crude benchmarks have climbed to record highs, becoming the most expensive globally, with traders attributing the spike to tightening supply.

Most countries have so far pushed back against US President Donald Trump’s call to send naval escorts through the strait, drawing criticism from the president, who accused Western allies of ingratitude after years of support.

Despite the earlier rally, WTI price dropped more than 4.25% on Monday after several tankers safely transited the Strait of Hormuz over the weekend, raising hopes for a potential reopening. India is also negotiating additional vessels, while several nations engage in back-channel talks with Iran to secure safe passage. Meanwhile, the US continues to allow Iran to ship crude through Hormuz, and reports suggest a direct communication channel between Washington and Tehran has been activated.

• Gold attracts some safe-haven flows amid a further escalation of tensions in the Middle East.
• Inflation fears temper Fed rate cut bets, underpinning the USD and capping the commodity.
• Traders seem reluctant to place aggressive bets ahead of this week’s key central bank events.

Gold (XAU/USD) sticks to modest intraday gains comfortably above the $5,000 psychological mark through the first half of the European session, though it lacks bullish conviction amid mixed cues. There are a few signs that the US-Israeli war on Iran is ending soon amid the escalating conflict between Israel and Hezbollah in Lebanon. In fact, the Israeli military said that it is expanding ground assault in southern Lebanon – an area where the militant group Hezbollah is known to hold sway. This keeps geopolitical risks in play and turns out to be a key factor lending some support to the safe-haven precious metal.

As the war enters its third week, Iran continues to attack civilian infrastructure – airports, ports, oil facilities, and commercial hubs – in the six Gulf states with missiles and drones. Furthermore, the disruption of shipping through the Strait of Hormuz – a key chokepoint for a fifth of global oil supply – remains supportive of elevated Crude prices. This continues to fuel inflationary concerns, which could force the US Federal Reserve (Fed) to keep interest rates higher for ‌longer and even consider rate hikes. The outlook, in turn, caps the non-yielding Gold and warrants caution for bulls.

Meanwhile, hawkish implications of the ongoing conflict in the Middle East revive the US Dollar (USD) demand following the overnight pullback from its highest level since May 2025 and contribute to keeping a lid on the XAU/USD pair. Traders, however, might opt to wait for the outcome of a two-day FOMC meeting on Wednesday before placing directional bets around the Gold. Moreover, policy updates by other major central banks – the European Central Bank (ECB), the Bank of Japan (BoJ), and the Bank of England (BoE) – should influence the XAU/USD pair during the latter part of the week.

XAU/USD 4-hour chart

Gold needs to strengthen above 200-SMA on H4 to back case for further intraday move up

The recent breakdown through the 200-period Simple Moving Average (SMA) on the 4-hour chart and acceptance below the 38.2% Fibonacci retracement level of the February-March move up favors the XAU/USD bears. Moreover, the Moving Average Convergence Divergence (MACD) indicator (12, 26, 9) remains below zero with the line under its signal and a negative histogram, signaling persistent downside momentum. The Relative Strength Index (RSI) at 41 leans toward the weak side of neutral and aligns with sellers retaining the initiative for now.

Immediate resistance emerges at the 38.2% Fibo. retracement near $5,040, followed by the 200-period SMA around $5,063, with a break above this zone needed to ease bearish pressure and open the way toward the 23.6% Fibo. retracement at $5,186. On the downside, initial support is located at the psychological $5,000 area, ahead of the recent lows near $4,995–$4,985, where failure would expose deeper retracement toward the 50.0% retracement level at $4,921.41. A sustained close back above the 200-period SMA would weaken the bearish tone, while continued rejection below $5,040 keeps the focus on lower supports.

(The technical analysis of this story was written with the help of an AI tool.)

MUFG’s Senior Currency Analyst Lee Hardman highlights that USD/JPY is stalling just below 160.00 as Japan’s Finance Minister Katayama escalates verbal intervention, stressing readiness to respond at any time. Authorities argue recent Yen moves are misaligned with fundamentals, though the roughly 2% Yen decline since the Middle East conflict broadly matches US Dollar gains versus other G10 currencies.

Japanese officials raise intervention threat

"USD/JPY has continued to trade just below the 160.00 overnight hitting a high of 159.49. The pair has temporarily stalled at just below 160.00 reflecting renewed concerns over the risk of intervention to support the yen, and a broader loss of upward momentum for the US dollar yesterday. The dollar index dropped back below 100.00."

"Finance Minister Katayama has stepped up verbal intervention at the start of this week. She stated overnight that “there has been significant volatility across financial markets overall” while suggesting that the moves in the yen have not been aligned with fundamentals for a while, adding that the deviation appears particularly significant at present."

"She then warned that “considering the impact exchange rates have on people’s daily lives, we are fully prepared to respond at any time”. It follows on from her comments yesterday that they are ready to take “bold action” if needed."

"The comments in recent days have cast doubt on the view that was building among market participants that Japanese policymakers may be more tolerant to allow the yen to weaken in the near-term in response to the negative energy price shock."

"The yen has weakened by around 2% against the US dollar since the Middle East conflict began. The scale of the sell-off is broadly in line with US dollar strength against other G10 currencies highlighting that the recent yen sell-off is not an outlier."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)