The euro fell in European trading on Monday to its lowest level in four months against the US dollar, as investors continued to favor the US currency as a preferred alternative investment amid the escalating war with Iran.

The single currency is also under heavy pressure from the worsening global energy crisis, especially after the sharp surge in oil and natural gas prices. The crisis is expected to drive prices higher and accelerate inflation across the euro area, placing increasing inflationary pressure on policymakers at the European Central Bank.

This comes at a time when the European economy may require additional monetary support to limit the slowdown in economic activity, creating a complex policy challenge between containing inflation and supporting growth.

Price Overview

Euro exchange rate today: the euro fell about 0.95% against the dollar to $1.1507, its lowest level since November 24, down from Friday’s closing level of $1.1616. The session’s high was recorded at $1.1563.

The euro ended Friday’s trading up less than 0.1% against the dollar amid modest buying from lower levels.

Last week, the euro lost about 1.7% against the dollar, marking its largest weekly decline since April 2024 due to the global energy crisis.

Global energy prices

Global oil prices jumped more than 30% at the start of trading on Monday, breaking decisively above the $100 per barrel threshold for the first time since 2022 and heading toward their largest daily gain in nearly 40 years.

Prices are rapidly approaching the $120 per barrel level as the military conflict in the Middle East intensifies, with major producers in the region cutting output following attacks on energy facilities.

TTF natural gas futures also surged about 50% over the past week to exceed €52 per megawatt-hour, the highest level since early 2023.

Analysts at Wells Fargo said in a note that the euro faces a difficult situation. The seasonal refilling of natural gas storage in Europe is about to begin, and the European Union is entering the season with record-low gas inventories, meaning it will need to purchase large volumes of energy at a time when prices could rise sharply.

US Dollar

The dollar index rose 0.85% on Monday to a four-month high of 99.70, reflecting broad strength in the US currency against a basket of global peers.

The rally comes as investors buy the dollar as a preferred safe-haven asset, with the Iran war entering its tenth day and signs growing of a wider military conflict in the Middle East, particularly after Mojtaba, Khamenei’s son, was selected as his successor — a move not welcomed in the United States.

Views and analysis

Ray Attrill, head of FX strategy at National Australia Bank, said the US dollar is receiving strong support from traditional safe-haven demand as well as from the United States’ status as a net energy exporter, in sharp contrast to most European countries.

Michael Every, global strategist at Rabobank, said the longer the heated situation continues, the more rapidly the damage will multiply, something that oil markets are already reflecting after last week’s expectations that conditions could become far worse.

Deepali Bhargava, head of regional research for Asia-Pacific at ING, said the real question is how high prices will rise and how long they will remain elevated, as that will ultimately determine the economic consequences.

She added that a prolonged conflict combined with continued currency weakness would directly increase inflationary pressures across the region.

George Saravelos, head of global FX research at Deutsche Bank, said the impact of the Iran war on the euro/dollar pair revolves around a single factor: energy.

He added that a negative supply shock is currently forming, acting as a direct tax on Europeans that must be paid to foreign producers in US dollars.

Analysts at ING also wrote in a research note that the position of the European Central Bank has suddenly come into question and that they doubt the issue can be resolved in the very near term.

They added that the possibility of the ECB raising interest rates represents a serious risk to interest rate spread trades and could lead to a significant widening in euro area government bond spreads.

European interest rates

Following higher-than-expected inflation data released last week in Europe, money markets sharply reduced pricing for a 25-basis-point rate cut by the European Central Bank in March from 25% to just 5%.

To reassess these expectations, investors are awaiting additional economic data from the euro area on inflation, unemployment, and wages.

The Japanese yen fell broadly in Asian trading on Monday against a basket of major and secondary currencies, extending its losses for a third consecutive session against the US dollar and hitting a two-month low, as investors continued to favor the US currency as a preferred alternative investment. The move comes as global oil prices surged and moved close to the $120 per barrel mark for the first time since 2022.

The decline in the Japanese currency came despite the release of strong data from Tokyo earlier today, showing that real wages in Japan rose to their highest level in six months, which could increase inflationary pressure on policymakers at the Bank of Japan.

Price Overview

Japanese yen exchange rate today: the dollar rose 0.75% against the yen to ¥158.90, the highest level since January 23, up from Friday’s closing level of ¥157.75, while the session’s low was recorded at ¥158.03.

The yen ended Friday’s trading down 0.15% against the dollar, marking its second consecutive daily loss due to the fallout from the Iran war.

Last week, the yen lost about 1.1% against the dollar, marking its third consecutive weekly decline, driven by the military conflict in the Middle East and reduced expectations for Japanese interest rate hikes.

Global oil prices

Global oil prices jumped more than 30% at the start of trading on Monday, breaking above the $100 per barrel threshold for the first time since 2022 and heading toward their largest daily gain in nearly 40 years.

Prices are rapidly approaching the $120 per barrel mark as the military conflict in the Middle East intensifies, prompting major producers in the region to cut output following attacks on energy facilities.

US Dollar

The dollar index rose 0.85% on Monday, reaching a four-month high of 99.70, reflecting broad strength in the US currency against a basket of global peers.

The rally comes as investors buy the dollar as a preferred safe-haven asset, with the Iran war entering its tenth day and signs growing of a wider military conflict in the Middle East, particularly after Mojtaba, Khamenei’s son, was selected as his successor — a development not welcomed in the United States.

Views and analysis

Ray Attrill, head of FX strategy at National Australia Bank, said the US dollar is receiving strong support from traditional safe-haven demand as well as from the United States’ status as a net energy exporter, in sharp contrast to most European countries.

Michael Every, global strategist at Rabobank, said: “The longer this heated situation continues, the more rapidly the damage multiplies, which is now being reflected in oil markets that last week still had some expectations that the situation could become far worse.”

Deepali Bhargava, head of regional research for Asia-Pacific at ING, said the real question is how high prices will rise and how long they will remain elevated, as this will ultimately determine the economic consequences.

She added that a prolonged conflict combined with continued currency weakness would directly increase inflationary pressures across the region.

Japanese wages

Japan’s labor ministry said Monday that total monthly cash earnings and a separate measure of full-time wages rose 3.0% year-on-year in January, the fastest pace since July and above expectations for a 2.5% increase, after wages had risen 2.4% in December.

The strong wage growth paves the way for further increases in prices and faster inflation in the coming period. Renewed inflationary pressure on policymakers at the Bank of Japan strengthens the case for interest rate hikes this year.

Japanese interest rates

Following the above data, market pricing for a 25-basis-point rate hike by the Bank of Japan at its March meeting remained at 5%.

Pricing for a 25-basis-point rate increase at the April meeting rose from 25% to 35%.

In the latest Reuters poll, the Bank of Japan is expected to raise interest rates to 1% by September.

Analysts at Morgan Stanley and MUFG wrote in a joint research report that they had previously viewed the probability of a rate hike in March or April as low, but with rising uncertainty stemming from developments in the Middle East, the Bank of Japan is likely to adopt a more cautious stance, reducing the likelihood of near-term rate increases.

Investors are now awaiting additional data on inflation, unemployment, and wages in Japan to reassess these expectations.

US crude futures rose more than 12% on Friday but remained below Brent prices, as buyers sought available supplies while Middle Eastern shipments became restricted following the effective closure of the Strait of Hormuz amid the widening war between the United States and Israel on one side and Iran on the other.

Brent crude futures settled at $92.69 per barrel, up $7.28 or 8.52%. US West Texas Intermediate crude reached $90.90 per barrel, gaining $9.89 or 12.21%.

This marked the second consecutive session in which gains in US crude outpaced those of the Brent benchmark.

Giovanni Staunovo, an analyst at UBS, said refineries and trading companies are searching for alternative cargoes, while the United States remains the world’s largest oil producer. He added that the price gap reflects transportation costs aimed at preventing US inventories from falling too quickly due to rising exports.

Janiv Shah, vice president of oil analysis at Rystad Energy, pointed to several factors behind the divergence between Brent and WTI gains, including improved refining margins along the US Gulf Coast, as well as arbitrage flows with Europe and activity in Washington’s futures markets.

Crude oil was also heading for its largest weekly gain since the extreme volatility during the COVID-19 pandemic in the spring of 2020, as the Middle East conflict continued to halt shipping and energy exports through the vital Strait of Hormuz.

Oil could reach $100 or even $150

Qatar’s energy minister said Gulf energy producers may be forced to halt exports within weeks, potentially pushing oil prices to $150 per barrel, according to an interview with the Financial Times published Friday.

John Kilduff, partner at Again Capital, said markets are witnessing a worst-case scenario unfolding, adding that expectations for oil to reach $100 per barrel could soon materialize.

The sharp rally in oil prices began after the United States and Israel launched strikes on Iran last Saturday, prompting Tehran to halt tanker traffic through the Strait of Hormuz.

About 20% of global daily oil demand passes through this waterway. With the strait effectively closed for seven days, roughly 140 million barrels of oil have been unable to reach markets, equivalent to about 1.4 days of global demand.

The conflict has also spread to major energy-producing regions in the Middle East, disrupting production and forcing some refineries and liquefied natural gas facilities to shut down.

Staunovo said every day the strait remains closed will push prices higher, noting that markets had previously believed US President Donald Trump might step back from escalation due to concerns about rising oil prices. However, the continuation of the crisis highlights the scale of risks facing global supplies.

Trump told Reuters he is not concerned about higher gasoline prices in the United States linked to the conflict, saying: “If prices go up, they go up.”

Meanwhile, speculation that the US Treasury might take steps to limit rising energy costs pushed prices down by more than 1% earlier on Friday before they recovered after a Bloomberg report said the Trump administration had ruled out using the Treasury to intervene in oil futures markets.

On Thursday, the Treasury granted exemptions allowing companies to purchase sanctioned Russian oil. The first of these waivers went to Indian refineries, which subsequently bought millions of barrels of Russian crude.

US President Donald Trump is preparing to use the US Navy to escort oil tankers through the Strait of Hormuz amid the intensifying war against Iran. However, ensuring safe passage for the large volume of shipping that normally moves through the waterway will be a major challenge.

CNBC reported that Wall Street analysts believe Brent crude could exceed $100 per barrel if the waterway remains closed for an extended period. At that level, elevated oil prices could push the global economy toward recession.

The narrow strait is the only route for tankers entering and leaving the Arabian Gulf. According to energy consultancy Kpler, more than 14 million barrels of crude oil per day passed through the strait in 2025, representing roughly one-third of the world’s seaborne oil shipments.

Around 100 vessels per day

Matt Smith, oil analyst at Kpler, said that about 100 tankers and cargo ships normally pass through the strait each day, while roughly 400 tankers are currently stranded in the Gulf because of the war.

Matt Wright, senior shipping analyst at the same firm, said: “There are hundreds and hundreds of ships still in the Gulf in the Middle East,” adding that the US Navy would need “a very long time to escort them even if it moved a few ships at a time.”

Trump’s pledge to escort tankers if necessary, along with offering political risk insurance for shipowners, helped calm oil markets on Tuesday and Wednesday.

However, prices rose again on Thursday after Iran said it had attacked a tanker with a missile. At the same time, the British navy reported a major explosion on a tanker anchored in Iraqi territorial waters.

Are there enough warships?

Helima Croft, head of global commodities strategy at RBC Capital Markets, said in a client note on Tuesday: “The key question will be whether there are enough naval assets to escort ships while continuing operations against Iran.”

Wright noted that insurance is not the main issue for shipowners, explaining that tankers are not moving due to concerns about their physical security. He added that shipowners will need to see a sustained period without attacks before risking passage through the strait again.

He stressed that restoring oil flows from the Gulf is extremely urgent, but “there must be some confidence that Iran’s ability to continue the war has been reduced.”

Houthi militants in Yemen disrupted shipping in the Red Sea through missile attacks for more than a year beginning in late 2023. Wright said: “But they do not compare with the complexity of Iranian capabilities, so the threat is completely different.”

Analysts at Rapidan Energy believe US naval escorts could provide partial relief but would not be sufficient on their own to reopen the strait. They added that the United States would need to systematically weaken Iran’s military capabilities, a process that would take time.

The 1980s experience

Croft noted that the US Navy escorted oil tankers through the strait in 1987 when commercial vessels became targets during the Iran–Iraq war. However, she pointed out that at the time the US military was not simultaneously fighting a war against the regime in Tehran while also guaranteeing safe passage for ships.

US Energy Secretary Chris Wright said on Wednesday that the Trump administration would provide naval escorts “as soon as possible.”

He said in an interview with Fox News: “Right now our navy and our military are focused on other matters, namely disarming this Iranian regime that attacks its neighbors and Americans in every possible way.”

He added: “In the not-too-distant future we will be able to use the navy to restore energy flows again, but for now markets remain well supplied.”

No timeline

White House press secretary Karoline Leavitt told reporters on Wednesday that the Trump administration does not have a timeline for when safe commercial navigation through the strait might resume.

Speaking at a press briefing, she said: “I do not want to commit to a timeline, but this is being actively evaluated by the Department of War and the Department of Energy.”

Analysts believe that if tankers remain trapped inside the Gulf for a longer period, the situation in the global oil market could become increasingly complicated.