Euro Slides to Two-Week Low on US-Iran Standoff

The euro held just below $1.17, its weakest level in two weeks, and is on track for a 0.7% weekly decline against the US dollar. The drop reflects renewed market unease as US-Iran negotiations stall and the Strait of Hormuz remains effectively closed, dashing earlier hopes of a diplomatic breakthrough to end the conflict. Attention now shifts to next Thursday’s European Central Bank policy meeting, where policymakers are expected to hold interest rates steady. The ECB is adopting a wait-and-see approach to assess the impact of recent macroeconomic data and geopolitical developments, particularly the Middle East conflict, against its earlier projections. Despite this caution, money markets are fully pricing in two quarter-point rate hikes in 2026, with a 55% probability assigned to a third increase by year-end.

The euro weakened below $1.17 against the dollar, its weakest level in two weeks, as tensions in the Strait of Hormuz persisted and diplomatic efforts stalled. With no new peace talks scheduled, the US and Iran remain at odds over control of the critical waterway. President Trump extended the April 7 truce indefinitely, pending a new Iranian proposal, but Tehran has ruled out immediate negotiations, pushing Brent crude above $103 per barrel and deepening economic uncertainty. New data showed the Eurozone’s private sector contracted in April at the fastest pace since November 2024, as the Iran war drove up energy costs, hurting consumer demand and the services sector. Meanwhile, Germany’s Economics Ministry halved its 2026 growth forecast, blaming the energy shock from the Middle East conflict.

The euro stabilized at $1.17 against the US dollar, its weakest point in two weeks, as tensions flared again in the Strait of Hormuz and diplomatic progress remained elusive. With no new peace talks in sight, both the US and Iran stay deadlocked over control of the strategic waterway. President Trump has extended the April 7 truce indefinitely, awaiting a fresh proposal from Iran, but Tehran has dismissed the prospect of immediate negotiations. The standoff has driven Brent crude above $103 per barrel, adding to economic uncertainty. On the data front, today’s releases will include updated private sector activity reports for Germany, France, and the broader Eurozone. Yesterday, Germany’s Economics Ministry slashed its 2026 growth forecast by half, citing the severe energy shock stemming from the Middle East conflict.