The euro weakened against a basket of global currencies in European trading on Monday, extending its losses for a second consecutive session against the US dollar and falling to its lowest level in two months. The decline came as investors moved away from risk-sensitive assets amid escalating geopolitical tensions in the Middle East following a new exchange of military strikes between Iran and Israel.

Rising global oil prices have also revived concerns about accelerating inflation, increasing the likelihood that major central banks could raise interest rates in the near term, a sharp shift from pre-war expectations that rates would remain unchanged or move lower for an extended period.

Price action

• EUR/USD fell about 0.15% to $1.1506, its lowest level since April 6, compared with Friday’s closing level of $1.1521. The pair touched an intraday high of $1.1535.

• The euro ended Friday down 0.8% against the dollar, its largest daily loss since March 13, after stronger-than-expected US employment data boosted demand for the US currency.

• The single currency lost 1.2% against the dollar last week, marking its third weekly decline in a month, pressured by rising US Treasury yields and renewed geopolitical tensions in the Middle East.

US dollar

The US Dollar Index gained 0.1% on Monday, extending its advance for a second straight session and reaching a two-month high of 100.17 points, reflecting continued strength in the US currency against major global peers.

Strong US labor market data released on Friday reinforced expectations that the Federal Reserve may continue normalizing monetary policy and raise interest rates later this year.

The dollar also benefited from renewed safe-haven demand as military tensions between Iran and Israel intensified, threatening the fragile ceasefire arrangement in the region.

Oil prices

Global oil prices rose more than 3% on Monday, resuming their strong rally after a brief two-day pause and moving toward their highest levels in several weeks.

The gains were driven by renewed fears of supply disruptions from the Middle East as military exchanges between Iran and Israel escalated.

Latest developments in the Iran conflict

• Iran and Israel exchanged military strikes, raising concerns about the durability of the fragile ceasefire in the Middle East.

• Iran’s Revolutionary Guard launched multiple waves of ballistic missiles targeting Israeli sites, including the Ramat military base, in response to Israeli attacks on Beirut’s southern suburbs.

• The Israeli military reported intercepting the missiles while activating air raid sirens and placing hospitals and schools on maximum alert.

• US President Donald Trump reportedly held an urgent phone call with Israeli Prime Minister Benjamin Netanyahu, urging restraint and discouraging an immediate military response.

• Israeli warplanes carried out intensive strikes against military targets and other locations in Tehran, with powerful explosions reported across the capital.

• Trump informed Israeli officials that Washington was close to reaching a final agreement with Tehran through Pakistani mediation and requested additional time for diplomacy.

• The fragile ceasefire between the United States and Iran has technically remained in place since early April.

• Trump delivered a direct warning to Tehran, saying: “You’ve launched your missiles. That’s enough. Return to the negotiating table immediately.”

• Trump also stated that the latest Israeli and Iranian strikes would not derail the peace process.

European interest rate outlook

• As oil prices continue to rise, money markets have increased the probability of a 25-basis-point interest rate hike by the European Central Bank in June from 93% to 98%.

• According to sources cited by Reuters, the ECB is now widely expected to raise interest rates in June as inflation projections continue to move in an unfavorable direction.

The Japanese yen weakened against major and minor currencies in Asian trading on Monday, extending its losses for a second consecutive session against the US dollar and falling to its lowest level in six weeks. The decline was driven by a risk-off mood in global markets as geopolitical tensions escalated in the Middle East following a renewed exchange of military strikes between Iran and Israel.

With the yen now trading beyond the closely watched ¥160 per dollar level, expectations are growing that Japanese authorities may intensify warnings against excessive currency moves, while speculation is increasing that policymakers could intervene to support the currency and slow its decline.

Price action

• USD/JPY rose about 0.15% to ¥160.39, the highest level since April 30, after opening at ¥160.19 and touching an intraday low of ¥160.14.

• The yen ended Friday down 0.2% against the dollar, marking its fifth loss in the past six sessions, following the release of stronger-than-expected US employment data.

• The Japanese currency lost 0.65% against the dollar last week, its fourth consecutive weekly decline, pressured by higher US Treasury yields and reduced expectations for a Japanese interest rate increase in June.

US dollar

The US Dollar Index gained 0.1% on Monday, extending its advance for a second straight session and reaching a two-month high of 100.17 points, reflecting continued strength in the US currency against a basket of major global currencies.

Strong US jobs data released on Friday reinforced investor expectations that the Federal Reserve may continue normalizing monetary policy and raise interest rates later this year.

The dollar also benefited from renewed safe-haven demand as military tensions between Iran and Israel intensified, threatening the fragile ceasefire arrangement in the Middle East.

Oil prices

Global oil prices climbed more than 3% on Monday, resuming the strong gains that paused over the previous two sessions and moving toward their highest levels in several weeks.

The rally was driven by renewed concerns over potential supply disruptions in the Middle East amid the latest military exchanges between Iran and Israel.

Developments in the Iran-Israel conflict

• Iran and Israel exchanged military strikes, raising concerns about the stability of the fragile ceasefire in the region.

• Iran’s Islamic Revolutionary Guard Corps launched multiple waves of ballistic missiles targeting Israeli positions, including the Ramat military base, in response to airstrikes on Beirut’s southern suburbs.

• The Israeli military said it intercepted the missiles while activating nationwide air raid sirens and placing hospitals and schools on maximum alert.

• US President Donald Trump reportedly held an urgent phone call with Israeli Prime Minister Benjamin Netanyahu, urging restraint and discouraging an immediate military response.

• Israeli warplanes carried out intensive strikes against military targets and other locations in Tehran, with large explosions reported across the capital.

• Trump informed Israeli officials that Washington was close to reaching a final agreement with Tehran through Pakistani mediation and requested several additional days for diplomacy to proceed.

• The ceasefire between the United States and Iran has technically remained in effect since early April.

• Trump delivered a stern message to Tehran, saying: “You’ve launched your missiles. That’s enough. Return to the negotiating table immediately.”

• Trump also stated that the latest Israeli and Iranian strikes would not derail efforts to reach a peace agreement.

¥160 intervention zone

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

According to Reuters sources, Tokyo intervened several times in late April and early May to support the yen. During that period, the exchange rate weakened to ¥160.72 per dollar, its lowest level since July 2024.

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

Finance Minister Satsuki Katayama reiterated that the government remains “prepared to take appropriate measures” should speculative or excessive currency fluctuations emerge.

Major US stock indexes moved lower on Friday as semiconductor stocks came under pressure following a strong rally, while a stronger-than-expected US jobs report reinforced expectations that the Federal Reserve could maintain a more hawkish monetary policy stance.

The latest labor market data showed that nonfarm payrolls increased by 172,000 jobs in May, following a gain of 115,000 jobs in April. The figure far exceeded economists’ expectations of 85,000 new jobs, according to a Reuters survey.

Following the report, financial markets sharply increased expectations for tighter monetary policy. Investors now see a 98% probability that the Federal Reserve will raise interest rates by 25 basis points before the end of the year, compared with roughly 60% prior to the employment data.

The report comes ahead of the first policy meeting under new Federal Reserve Chair Kevin Warsh later this month, as policymakers continue to grapple with elevated inflation pressures, partly intensified by the conflict in the Middle East.

Mark Malek, Chief Investment Officer at Siebert Financial, said the labor market remains resilient despite signs of moderation.

“You can’t say the labor market is booming, but it’s certainly not collapsing either,” Malek said.

He added that a pullback after recent gains would be healthy for the market.

Technology sector under pressure

Shares of chipmakers led the decline. Semiconductor giant NVIDIA, currently the world’s most valuable company by market capitalization, fell 2.5%.

Meanwhile, shares of Intel, Micron Technology, Advanced Micro Devices, and Broadcom declined between 4.2% and 6.2%.

The technology sector dropped 2.5% for a third consecutive session, while the Philadelphia Semiconductor Index slid more than 5%.

Chip stocks had previously been a major driver of Wall Street’s rebound from March lows to record highs, supported by enthusiasm surrounding artificial intelligence and strong corporate earnings.

At the same time, six of the eleven major sectors within the S&P 500 traded higher, with consumer staples leading gains as investors rotated into more defensive areas of the market.

Market performance

By 9:43 a.m. Eastern Time, the Dow Jones Industrial Average was down 128.36 points, or 0.25%, at 51,433.57.

The S&P 500 fell 64.63 points, or 0.85%, to 7,519.68, while the Nasdaq Composite declined 374.02 points, or 1.39%, to 26,456.94.

If losses hold through the close, the S&P 500 would record its first weekly decline since April, while the Nasdaq would end the week modestly lower. The Dow, however, remained on track for a third consecutive weekly gain.

Geopolitics and corporate news

US-Iran negotiations remained stalled heading into the weekend, highlighting the continued complexity of efforts to reach a broader peace agreement and reduce geopolitical risks.

Meanwhile, [Citigroup](https://www.citigroup.com?utm_source=chatgpt.com) said it had reduced its equity exposure following the recent rally, citing inflation concerns and crowded investor positioning, while maintaining a positive long-term outlook for US stocks driven by AI-related earnings growth.

Among individual stocks, Lululemon Athletica dropped 8% after lowering its full-year profit outlook and issuing quarterly guidance below Wall Street expectations.

In contrast, The Cooper Companies gained 6.4% after reporting second-quarter results that exceeded expectations.

S&P Global announced it would not change the inclusion criteria for its major indexes, reducing the likelihood that SpaceX will join the S&P 500 immediately following its anticipated IPO, which could become the largest public offering in history.

At the same time, S&P Dow Jones Indices is preparing to announce the results of its regular index rebalancing after the market close. Marvell Technology is viewed as one of the leading candidates for inclusion in the benchmark index after surpassing a market value of $270 billion.

Market breadth remained negative, with declining stocks outnumbering advancing stocks by 2.04-to-1 on the NYSE and 2.11-to-1 on the Nasdaq.

The S&P 500 recorded seven new 52-week highs and two new lows, while the Nasdaq posted 27 new highs and 38 new lows.

Indonesia’s nickel industry is beginning to feel the impact of tighter raw material supplies after the government moved to curb nickel ore production, forcing many smelters to reduce operating rates and scale back output.

Nickel prices reflected some of the changing market dynamics, with spot nickel falling 2.3% to $18,300 per ton as of 15:26 GMT.

Indonesia’s Energy Ministry reduced the country’s 2026 nickel ore production quota to between 260 million and 270 million metric tons, down from 320 million tons produced last year. The new target is also well below industry demand estimates of 340 million to 350 million tons for the current year.

The production cuts were introduced after years of oversupply that weighed heavily on global nickel prices.

Smelter utilization declines

According to Indonesia’s nickel industry association, utilization rates at rotary kiln electric furnace (RKEF) nickel smelters have fallen to 76%, compared with 84% a year ago.

Arif B. Kusuma, chairman of the industry group, said during Indonesia’s Critical Minerals Conference on Friday that several production lines in South Sulawesi and Central Sulawesi have reduced output to less than 50% of capacity.

He explained that operators are maintaining minimum production levels to avoid shutting furnaces down completely, since restarting idle furnaces is expensive and can take several months.

Government seeks to prevent another supply glut

Septian Hario Seto, a member of Indonesia’s National Economic Council, said production controls had become necessary after years of oversupply created significant pressure on nickel prices.

“If we do not control production, I believe we will see the largest surplus in nickel market history in 2026,” Seto said.

Nickel prices on the London Metal Exchange climbed to $20,000 per ton on May 6, their highest level since May 2024, as investors grew concerned about potential supply shortages from Indonesia, the world’s largest nickel producer.

Seto stated that a price range between $18,000 and $20,000 per ton represents the “ideal level” for Indonesia.

“We would like to see prices remain within this range, but we certainly do not expect nickel prices to rise significantly above $20,000 per ton because that would create problems for end users,” he said.

Major producer exhausts quota

Meanwhile, PT Weda Bay Nickel, the Indonesian operation partly owned by the French mining company Eramet, has suspended nickel ore production after exhausting its mining quota at the end of May.

The company plans to apply for an additional production allocation as it seeks to resume operations.

The developments highlight Indonesia’s increasingly active role in managing global nickel supply, as policymakers attempt to balance producer profitability against the risk of another prolonged period of oversupply in the market.