Euro Slips Toward $1.17 on US-Iran Tensions

2026-05-12 08:15 By Joana Ferreira 1 min. read

The euro weakened toward $1.17, retreating from near three-week highs, as investors assessed the impact of escalating US-Iran tensions and growing expectations of further ECB rate hikes.

Brent crude oil prices climbed above $105 a barrel after US President Trump rejected Iran’s latest peace proposal as unacceptable.

Money markets now price in three ECB rate hikes this year, with an over 86% chance of the first increase in June.

ECB President Christine Lagarde reaffirmed on Friday that the central bank stands ready to act swiftly if needed, noting the euro area’s economic position is stronger now than before Russia’s invasion of Ukraine.

On the economic data front, Germany’s ZEW Indicator of Economic Sentiment improved by seven points to -10.2 in May, rebounding from a more than three-year low and exceeding market expectations.

Although the increase suggests a more optimistic outlook, the indicator remains negative as investors await a swift resolution to the Iran conflict.



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