Euro Drops Over 2% in March as Middle East Tensions Weigh

2026-03-31 07:24 By Joana Ferreira 1 min. read

The euro closed March below $1.15, nearing its lowest point in nearly two weeks, after a volatile month marked by escalating tensions in the Middle East.

The common currency lost over 2% against the dollar as traders assessed the economic impact of the deepening conflict.

Adding to the uncertainty, a Wall Street Journal report revealed that US President Donald Trump had signaled a potential end to the US military campaign against Iran, even if the critical Strait of Hormuz remained largely blocked.

Soaring oil prices fueled inflation across Europe, prompting markets to drastically revise their expectations for the European Central Bank’s policy.

Investors now anticipate at least two interest rate hikes in 2026, abandoning earlier forecasts of a 40% chance of a rate cut.

While French central bank chief François Villeroy de Galhau reaffirmed the ECB’s commitment to curbing energy-driven inflation, he cautioned that it was “too early” to specify the timing of any rate adjustments.



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Euro Drops Over 2% in March as Middle East Tensions Weigh
The euro closed March below $1.15, nearing its lowest point in nearly two weeks, after a volatile month marked by escalating tensions in the Middle East. The common currency lost over 2% against the dollar as traders assessed the economic impact of the deepening conflict. Adding to the uncertainty, a Wall Street Journal report revealed that US President Donald Trump had signaled a potential end to the US military campaign against Iran, even if the critical Strait of Hormuz remained largely blocked. Soaring oil prices fueled inflation across Europe, prompting markets to drastically revise their expectations for the European Central Bank’s policy. Investors now anticipate at least two interest rate hikes in 2026, abandoning earlier forecasts of a 40% chance of a rate cut. While French central bank chief François Villeroy de Galhau reaffirmed the ECB’s commitment to curbing energy-driven inflation, he cautioned that it was “too early” to specify the timing of any rate adjustments.
2026-03-31
Euro Set to End March 2% Weaker
The euro slipped to $1.15 by the end of March, flirting with its weakest level since mid-March and heading for a monthly drop of over 2% against the dollar. Risk aversion intensified as traders weighed the economic fallout from the worsening Middle East conflict, with reports of US troop preparations for a possible ground operation eclipsing Washington’s claims of progress in Iran talks. Economic data added to the pressure: German CPI pointed to rising inflation in Europe’s largest economy, while the Eurozone business survey showed a steep decline in sentiment as inflation expectations spiked. Markets have radically repriced ECB policy, now anticipating at least two rate hikes in 2026, and potentially a third, ditching earlier expectations of a 40% chance of a cut. Meanwhile, French central bank chief François Villeroy de Galhau stressed the ECB’s resolve to contain energy-driven inflation, though he cautioned it was “too early” to discuss specific timing for rate increases.
2026-03-30
Euro Heads for Over 2% Monthly Loss as Middle East Risks Weigh
The euro held steady at $1.15 by the end of March, poised for a monthly decline of over 2% against the US dollar. Traders offloaded riskier assets as concerns mounted over the economic fallout from the escalating Middle East conflict, with reports suggesting thousands of US troops were preparing for a potential ground operation, despite Washington’s insistence that diplomatic talks with Iran were progressing. Investors also turned their attention to a wave of key economic data due this week, including March inflation flash estimates from Europe’s major economies. Market sentiment has shifted sharply on ECB policy, with traders now pricing in at least two interest rate hikes this year and a growing possibility of a third, abandoning earlier expectations of a 40% chance of a rate cut in 2026.
2026-03-30