The euro weakened in European trading on Wednesday against a basket of global currencies, resuming losses against the US dollar after a two-day recovery. The single currency moved lower once again toward a three-month low, pressured by escalating geopolitical tensions in the Middle East, particularly after the United States launched a new round of airstrikes against Iran.

Higher oil prices are renewing inflationary pressures on policymakers at the European Central Bank, strengthening expectations that the ECB could raise interest rates by 25 basis points at its June meeting, pending further economic data and confirmation of the inflation outlook.

Price action

• EUR/USD today: The euro fell about 0.1% against the dollar to $1.1532, compared with an opening level of $1.1543. The pair reached an intraday high of $1.1552.

• The euro ended Tuesday’s session up 0.1% against the dollar, marking its second consecutive daily gain as it continued recovering from a nearly three-month low of $1.1500.

US dollar

The US Dollar Index rose approximately 0.1% on Wednesday, resuming gains after a two-session pause and reflecting broader strength in the US currency against major global peers.

The advance was driven by renewed demand for the dollar as a safe-haven asset amid rising geopolitical tensions in the Middle East after the United States launched a fresh wave of airstrikes against Iran. Iran’s Revolutionary Guard subsequently announced attacks targeting the US Fifth Fleet in Bahrain and American military facilities in Kuwait and Jordan.

Oil prices

Global oil prices climbed more than 1% on Wednesday, rebounding from multi-week lows as concerns resurfaced over the continued closure of the Strait of Hormuz following the latest exchange of military strikes between the United States and Iran.

Latest developments in the Iran conflict

• The United States launched new airstrikes against Iran after an Apache helicopter was shot down.

• President Donald Trump said the response to the downing of the American helicopter should be “very strong.”

• US Central Command described the strikes on Iran as an act of “self-defense.”

• Iran announced retaliatory attacks against the US Fifth Fleet in Bahrain and military bases in Kuwait and Jordan.

• Despite the exchange of strikes, President Trump and Vice President JD Vance reiterated that negotiations toward a comprehensive nuclear agreement remain ongoing.

• Iranian Parliament Speaker Mohammad Bagher Ghalibaf stated that Tehran prefers a diplomatic solution to the crisis but also retains stronger alternatives if necessary.

European interest rates

• Money markets continue to price in a greater than 90% probability that the European Central Bank will raise interest rates by 25 basis points at its June meeting.

• Investors are awaiting additional eurozone data on inflation, employment, and wage growth to refine expectations regarding the ECB’s policy path.

• Sources speaking to Reuters indicated that an ECB rate hike in June remains highly likely, given inflation projections that are moving toward a less desirable scenario for policymakers.

The Japanese yen weakened in Asian trading on Wednesday against a basket of major and minor currencies, extending its losses for a second consecutive session against the US dollar and remaining close to a six-week low. Investors continued to favor the US dollar as a safe-haven asset amid escalating geopolitical tensions in the Middle East after the United States launched a new round of airstrikes against Iran.

Data released in Tokyo today showed producer prices rising to their highest level in three years, renewing inflationary pressure on policymakers at the Bank of Japan and strengthening expectations of an interest-rate hike next week.

Price action

• USD/JPY today: The US dollar rose about 0.1% against the yen to ¥160.43, from an opening level of ¥160.34, after touching an intraday low of ¥160.24.

• The yen ended Tuesday down 0.1% against the dollar, marking its lowest level in six weeks at ¥160.45.

US dollar

The US Dollar Index rose about 0.1% on Wednesday, resuming gains after a two-session pause and reflecting broader strength in the greenback against major global currencies.

The move was driven by renewed demand for the dollar as a safe haven following escalating geopolitical tensions in the Middle East. The United States launched a new wave of airstrikes against Iran, while Iran’s Revolutionary Guard responded with attacks targeting US facilities in Bahrain, Kuwait, and Jordan.

Oil prices

Oil prices climbed more than 1% on Wednesday, rebounding from multi-week lows as concerns resurfaced over a prolonged closure of the Strait of Hormuz following the exchange of military strikes between the United States and Iran.

Latest developments in the Iran conflict

• The United States launched new airstrikes against Iran following the downing of an Apache helicopter.

• Donald Trump said the response to the downing of the US helicopter should be “very strong.”

• US Central Command described the strikes on Iran as an act of “self-defense.”

• Iran announced retaliatory attacks targeting the US Fifth Fleet in Bahrain and American bases in Kuwait and Jordan.

• Despite the exchange of attacks, President Donald Trump and Vice President JD Vance reiterated that negotiations toward a comprehensive nuclear agreement remain ongoing.

• Iranian Parliament Speaker Mohammad Bagher Ghalibaf stated that Tehran prefers a diplomatic solution to the crisis but also possesses stronger alternatives if necessary.

The ¥160 intervention threshold

Japanese authorities continue to closely monitor currency market movements, particularly as the yen trades beyond the key ¥160-per-dollar threshold, a level widely viewed as a potential trigger for official intervention.

According to reports from Reuters, Tokyo intervened several times in late April and early May to halt the yen’s decline. At that time, the exchange rate reached ¥160.72 per dollar, the weakest level since July 2024.

Japanese officials have repeatedly warned against excessive currency volatility and emphasized that authorities stand ready to take decisive action against disorderly market movements.

Finance Minister Satsuki Katayama said the government is “prepared to take appropriate measures” if currency markets experience excessive or speculative moves.

Japanese interest rates

• Producer-price inflation in Japan accelerated to its highest level in three years, driven by higher energy costs linked to the Iran conflict.

• Market-implied odds of a 25-basis-point rate hike by the Bank of Japan at its June meeting increased from 75% to 95%.

• Investors are awaiting additional data on inflation, unemployment, and wage growth to further refine expectations for Japanese monetary policy.

• The Bank of Japan is scheduled to meet on June 15–16 to assess the appropriate policy stance for the world’s fourth-largest economy.

The artificial intelligence boom is driving a new wave of innovation in the energy sector, as governments and corporations race to meet the enormous increase in electricity demand expected from the rapid expansion of data centers.

Experts estimate that power demand from US data centers alone could surge by about 360% by 2030, reaching 110 gigawatts. Meeting this demand while maintaining affordable and sustainable energy is widely viewed as a major challenge that will require innovative solutions and significant technological advances.

“There is no way to get there without a technological breakthrough,” said Sam Altman, founder of OpenAI, during the 2024 World Economic Forum in Davos.

For Altman, the scale of the challenge is a direct argument for increasing investment in nuclear fusion research, which supporters believe could eventually provide an unlimited source of clean energy.

Alongside figures such as Sam Altman and Bill Gates, many Silicon Valley investors have spent years backing fusion technology. Those efforts are now beginning to show results as new startups enter the sector and technological breakthroughs attract growing interest from Wall Street, reviving research that had seen limited progress for decades.

Big Tech’s interest extends beyond nuclear fusion to other advanced energy technologies, including enhanced geothermal power and space-based solar energy.

However, the most intriguing innovation emerging at the intersection of artificial intelligence and energy is not about generating new electricity at all. Instead, it focuses on improving the distribution of existing power and making energy consumption more flexible.

Virtual power plants instead of building new power stations

This week, [Google](https://www.google.com?utm_source=chatgpt.com) signed an unprecedented agreement with [Voltus](https://www.voltus.co?utm_source=chatgpt.com) to create a “virtual power plant.”

Under the agreement, Google will fund a program within the Mid-Atlantic power grid that pays households and businesses to reduce electricity consumption during specific periods.

The companies say the arrangement will provide Google with 100 megawatts of power capacity without requiring the construction of any additional infrastructure.

Google thus becomes the first customer of Voltus’ “Bring Your Own Capacity” program, which allows energy-hungry companies to finance electricity demand flexibility among communities surrounding their data centers.

Voltus connects a wide range of devices into a single virtual network, including electric vehicles, smart thermostats, and other energy-connected equipment. Participating households and businesses receive compensation, while the company can manage energy flows and utilize stored power when needed.

According to Latitude Media, technology companies participating in the program effectively finance the creation of a virtual power plant in regions where they need to operate data centers, while Voltus delivers that capacity directly to utility providers.

The model is designed to help data centers bridge the anticipated energy gap through the early 2030s.

The current pilot project is the largest and first of its kind, and it is expected to provide valuable insight into whether “energy flexibility” can help address the rapidly growing electricity demands of data centers.

Making data centers themselves more flexible in their energy use will also be an important part of the solution. A study from Duke University last year found that reducing data center electricity consumption during peak-demand periods could enable the addition of roughly 100 gigawatts of new data center capacity without building new power plants or transmission lines.

However, that approach remains unpopular among AI companies because it could reduce revenue during periods when energy consumption is curtailed.

As a result, virtual power plants have become one of the most popular solutions currently under consideration. Instead of reducing their own electricity use, major technology companies can pay others to consume less power, allowing them to secure the energy capacity they need while avoiding disruptions to their operations.

US stock indexes retreated on Tuesday as technology shares lost momentum, with investors turning more cautious ahead of inflation data and the highly anticipated initial public offering of SpaceX later this week.

Artificial intelligence-related stocks came under heavy selling pressure last Friday after disappointing guidance from Broadcom raised concerns about elevated valuations across the sector, particularly among semiconductor companies that have delivered strong gains this year.

Chipmakers declined, with shares of Intel, Broadcom, and Micron Technology falling between 1.7% and 2%, while the Philadelphia Semiconductor Index dropped 2% after gaining nearly 3% earlier in the session.

The technology sector within the S&P 500 also lost about 1.7%, as Nvidia fell 1.2%, Apple dropped 3%, and Microsoft declined 1.1%.

Jordan Rizzuto, Chief Investment Officer at GammaRoad Capital Partners, said technology stocks have been the primary driver of growth and market momentum during the recent rally and are also the most sensitive to interest-rate movements. As uncertainty surrounding the rate outlook increases, investors are taking profits in the sector.

Inflation data and the SpaceX IPO in focus

Friday’s stronger-than-expected US jobs report increased concerns that the Federal Reserve could raise interest rates later this year.

According to CME’s FedWatch tool, traders currently assign a 43% probability to a 25-basis-point rate hike in December.

Investors are now awaiting May consumer price index data, due on Wednesday, for further clues about the impact of higher energy prices linked to the Iran conflict on US inflation.

By 11:00 a.m. New York time, the Dow Jones Industrial Average had risen 131.61 points, or 0.26%, to 50,917.62. Meanwhile, the S&P 500 fell 16.10 points, or 0.22%, to 7,389.63, and the Nasdaq Composite dropped 176.07 points, or 0.68%, to 25,753.60.

At the same time, SpaceX’s expected market debut, with a projected valuation of $1.75 trillion, is being viewed as a key test for US equities amid concerns that investors may be overvaluing high-growth technology companies.

SpaceX aims to raise $75 billion through its IPO, making it the largest public offering in history.

Paul Nolte, Senior Wealth Advisor and Market Strategist at Murphy & Sylvest, said mutual funds and exchange-traded funds will likely need to make room for SpaceX shares within their portfolios.

In individual stock performance, advancing stocks outnumbered decliners by a ratio of 1.72-to-1 on the New York Stock Exchange and 1.32-to-1 on the Nasdaq.

The S&P 500 recorded 26 new 52-week highs and six new lows, while the Nasdaq posted 133 new highs and 84 new lows.