The euro rose in European trading on Thursday against a basket of major currencies, remaining in positive territory for a second consecutive session against the US dollar as demand for the greenback as a safe-haven asset eased, particularly after US Central Command announced the conclusion of its military operations against Iran.

Following the recent surge in oil prices triggered by renewed tensions in the Strait of Hormuz, expectations have increased that the European Central Bank could deliver one additional 25-basis-point interest rate hike before the end of the year.

The Price

• The euro rose more than 0.1% against the US dollar to $1.1430, from today's opening level of $1.1416, after touching an intraday low of $1.1414.

• The euro closed Wednesday's session up by less than 0.1% against the dollar, marking its fourth daily gain in the past five sessions, supported by expectations of higher European interest rates.

US dollar

The dollar index fell 0.1% on Thursday, extending losses for a second straight session and reflecting broad weakness in the US currency against a basket of major currencies.

The decline came as demand for the dollar as a safe-haven asset slowed after reports suggested that the latest US-Iran military exchanges were unlikely to trigger a renewed war in the Middle East.

Global oil prices

Oil prices fell by around 0.5% on Thursday, retreating from two-week highs amid profit-taking and corrective trading, while reports indicated that shipping traffic through the Strait of Hormuz continued uninterrupted.

Latest developments in the Iran conflict

• US Central Command (CENTCOM) announced the conclusion of the current round of airstrikes on military targets inside Iran.

• The US strikes focused on coastal cities and facilities along the Strait of Hormuz, destroying two maritime traffic control towers and two piers at the strategic Port of Chabahar.

• The US military said it had destroyed more than 60 Islamic Revolutionary Guard Corps naval attack boats, while also targeting air defense systems and coastal radar installations.

• Iran's Revolutionary Guard responded by launching ballistic missiles and drones targeting 85 US military sites in Bahrain and Kuwait.

• Iranian Parliament Speaker Mohammad Bagher Ghalibaf said Tehran would not back down, stressing that the Strait of Hormuz would only reopen under "Iranian arrangements and procedures," not under US threats.

• US President Donald Trump said the American strikes were carried out in response to Iranian attacks on commercial vessels transiting the Strait of Hormuz.

European interest rates

• Money markets are currently pricing around a 10% probability of a 25-basis-point European Central Bank rate hike at the July meeting.

• The probability of a 25-basis-point ECB rate hike in December has risen to above 90%.

• Investors are awaiting additional eurozone data on inflation, unemployment, and wage growth to reassess those expectations.

The Japanese yen rose in Asian trade on Thursday against a basket of major and minor currencies, heading for its first gain in five days against the US dollar as it attempted to recover from 40-year lows, while Japanese authorities remained on alert to support the currency against excessive moves.

The US dollar weakened after some reports suggested that the latest exchange of military strikes between the United States and Iran would not lead to a renewed war, and that negotiations would resume very soon to complete the roadmap under the 60-day ceasefire agreement.

The Price

• The Japanese yen exchange rate today: The dollar fell against the yen by around 0.15% to 162.36 yen, from today's opening level of 162.58 yen, after hitting a high of 162.61 yen.

• The yen ended Wednesday's trading down 0.3% against the dollar, posting its fourth consecutive daily loss and hitting a one-week low of 162.71 yen, near its weakest level in 40 years at 162.84 yen.

Japanese authorities

The yen has returned to focus once again, especially after approaching its lowest levels against the US dollar since 1986, raising the possibility of intervention by Japanese authorities to protect the local currency from excessive weakness.

US dollar

The dollar index fell 0.1% on Thursday, extending losses for the second consecutive session and reflecting weaker levels for the US currency against a basket of global currencies.

The decline came amid slower safe-haven buying of the US currency, especially after some reports suggested that the current US-Iran military violations would not lead to a renewed war in the Middle East.

Global oil prices

Oil prices fell by around 0.5% on Thursday, retreating from their highest levels in two weeks, as prices corrected lower and investors took profits, while reports also pointed to continued shipping activity through the Strait of Hormuz.

Japanese interest rates

• The probability of the Bank of Japan raising interest rates by 25 basis points at its July meeting is currently steady below 25%.

• To reprice those odds, investors are awaiting more data on inflation, unemployment, and wages in Japan.

Minutes from the US Federal Reserve's June 16-17 meeting revealed that policymakers were divided over the future path of interest rates, discussing scenarios that could justify rate cuts if inflation slows, while also considering the possibility of further hikes should price pressures persist.

The meeting was the first chaired by Kevin Warsh following his appointment as head of the Federal Open Market Committee. During the post-meeting press conference, he described the discussions as "a family disagreement," which ultimately ended with a unanimous decision to leave the benchmark interest rate unchanged at 3.50%-3.75%, where it has remained throughout 2026.

Even so, the minutes showed no signs of deep divisions, instead presenting the range of views expressed by participants without pointing to any clear consensus within the committee.

They also indicated that the Summary of Economic Projections' dot plot, in which Warsh did not participate, leaned narrowly toward one additional rate hike this year, followed by rate cuts in each of the following two years.

The minutes noted that a significant number of participants believed the appropriate policy rate at year-end would be within or slightly below the current target range.

Meanwhile, another sizable group of participants judged that the appropriate year-end policy rate would be above the current range.

The minutes emphasized that all participants agreed future policy decisions would depend on incoming economic data.

Shift toward shorter policy communications

The 14-page meeting minutes were slightly shorter than usual, reflecting Kevin Warsh's preference for reducing the Federal Reserve's forward guidance on the future direction of monetary policy.

The post-meeting statement was also about one-third shorter than previous statements, a change that received broad support from participants.

According to the minutes, several members believed the time was right for substantial changes to the post-meeting statement, while the majority viewed a more concise statement as offering clear advantages.

The committee also removed language that had previously suggested a bias toward future interest rate cuts after most participants indicated they no longer wished to retain that wording.

In addition, the statement dropped several standard paragraphs describing current economic conditions and the committee's approach to achieving its dual mandate of price stability and maximum employment.

The beginning of Warsh's tenure

The release of the minutes comes less than two months after Kevin Warsh assumed the role of Federal Reserve Chair following his nomination by US President Donald Trump.

Trump had spent years criticizing former Fed Chair Jerome Powell for refusing to cut interest rates.

Since taking office, Warsh has pledged sweeping reforms to the central bank's operating framework.

During his press conference following the June meeting, he announced the formation of five working groups to review several areas, including the Fed's communication strategy with financial markets. The minutes also noted that some participants welcomed the opportunity to reassess the communication tools and practices used by the Federal Open Market Committee.

Since then, Warsh has appeared publicly only once, at the European Central Bank's forum in Portugal, where he largely refrained from offering clear signals about the future direction of monetary policy, remaining consistent with his preference for limiting forward guidance.

Control of the Strait of Hormuz has become what Iran's leadership describes as its "golden weapon," a strategic asset that now takes priority over the country's nuclear program, for which Tehran has endured decades of international sanctions, according to Reuters, citing informed Iranian sources.

According to the report, the strait has become so central to Iran's strategy that vessels transiting it without Tehran's approval came under fire this week, triggering an exchange of fire with the United States and threatening the temporary peace agreement reached last month.

Iranian officials, who for years avoided disrupting the passage of nearly one-fifth of global energy supplies through the Strait of Hormuz, now view control of the waterway as their strongest leverage against the West. They also believe it was the primary factor that forced Washington to bring the war to an end.

Tehran sees control of the strait as its strongest bargaining chip against Washington

Ebrahim Azizi, a member of Iran's parliamentary National Security and Foreign Policy Committee, addressed the United States in a social media post, saying: "Recognize the new Iranian order in the Strait of Hormuz... it is the only path forward."

Two senior Iranian sources told Reuters there is near-unanimous support within Tehran's decision-making circles for this policy, despite recognition that it could become a long-term point of contention with the international community.

One of the sources said Iranian leaders debated whether they might be overplaying this card, but the prevailing view was that no rational country would willingly give up such a powerful source of leverage.

"The Strait of Hormuz, Iran's golden weapon, is something they now want to take away from Iran, and that is simply impossible," the source said.

Although the temporary agreement signed by US President Donald Trump last month to end the war allowed shipping traffic through the strait to increase, it left the future governance of the waterway unresolved.

The agreement states that Iran "will make its utmost effort to ensure the safe passage of commercial vessels without imposing any fees" for a period of only 60 days.

Tehran interprets that wording as a US acknowledgment of its right to manage the strait, provided it does not impose tolls or other charges during the two-month period.

The United States and Gulf states reject that interpretation, arguing that the agreement grants Iran no authority over the waterway and merely obliges it to ensure the safe passage of commercial shipping without using force or imposing restrictions.

Nuclear program slips down the list of priorities

The report said one of the main reasons behind Iran's tougher stance on the Strait of Hormuz is its loss of trust in the United States, a sentiment that deepened after President Donald Trump's 2018 withdrawal from the nuclear agreement, his return to military action this year despite a previous ceasefire, and the launch of military operations while diplomatic negotiations were still underway.

One of the Iranian sources said any concession by Tehran on the Strait of Hormuz would encourage Washington to broaden its demands to include Iran's nuclear program and conventional missile arsenal.

"Backing down would mean surrender, and that is not an option," the source said.

For years, Iran repeatedly threatened to close the Strait of Hormuz, with officials describing such a move as "easier than drinking a glass of water." Privately, however, they acknowledged that they viewed it as a last resort because of its economic and political consequences.

The concern was that closing the strait would deepen Iran's international isolation, provoke its Gulf neighbors and major energy-consuming nations, and inflict serious damage on Iran's own economy.

According to the report, Iran's calculations changed after US and Israeli attacks that began on February 28 and resulted in the deaths of Iran's Supreme Leader and several senior officials. Iranian leaders concluded at that point that they had little left to lose.

Iran subsequently closed the strait to all vessels except its own, triggering what the report described as the largest disruption to global energy supplies in history.

After initially hesitating because of the impact on oil prices, the United States imposed a blockade on Iranian ports in April.

As the economic costs of the closure mounted for both sides, Washington and Tehran ultimately agreed to a temporary deal. Iran now believes it succeeded in forcing the United States back to the negotiating table through its control of the Strait of Hormuz and is seeking to formalize that new reality.

"Both sides became increasingly concerned about the immediate economic consequences, but each believes it emerged victorious. As a result, both think they only need to push a little further to get what they want," said Ali Ansari, Professor of Modern History at the University of St Andrews in Scotland.

The report added that Iran is now placing greater emphasis on the Strait of Hormuz than on its nuclear program, believing that Washington has effectively accepted its right to enrich uranium and retain its stockpile of highly enriched uranium within the country.

Although Iran's nuclear program has been the biggest source of tension with the United States for roughly 25 years, serving as the main reason for international sanctions and the principal public justification for the war launched by Trump, the temporary agreement ending the conflict postponed discussions on the issue to future negotiations.

The two Iranian sources said Tehran refuses to begin any talks over its nuclear program until the United States formally recognizes Iran's full right to administer the Strait of Hormuz.