The euro strengthened against the US dollar on Friday after Iran reopened the Strait of Hormuz, easing geopolitical tensions and triggering a broad selloff in the greenback and crude oil.
By late European trading, EUR/USD hovered around 1.1814–1.1834 after touching an intraday high near 1.1849, up about 0.46% from the prior session and on course for a third straight weekly gain.
Hormuz reopening eases geopolitical risk
Iran’s Foreign Minister Abbas Araghchi said the Strait of Hormuz has been reopened to commercial traffic during the current ceasefire, under conditions aligned with the truce in Lebanon.
All vessels must follow designated routes and obtain clearance from the Iranian Revolutionary Guards Navy. The move was seen as a key step in reducing immediate geopolitical risk in the Gulf, undermining demand for the US dollar as a safe-haven asset.
US President Donald Trump said the US naval blockade on Iranian vessels remains in force until a final agreement is reached, but confirmed both sides are cooperating on mine removal to restore safe navigation.
Dollar index hits lowest level since February
The US dollar index fell to 97.74, its weakest level since February 27, extending a three-week losing streak. The US currency retreated across major pairs, dropping 0.33% against the euro, 0.36% versus the pound and 0.88% against the yen.
Despite the broad decline, the dollar was the strongest against the Canadian dollar on Friday, according to currency performance data.
Oil slumps nearly 10%, inflation pressure cools
Energy markets reacted sharply to the easing of tensions. West Texas Intermediate crude slid almost 10% on the day to around $80.00 a barrel, the lowest level since March 10.
The steep drop in oil prices is reducing near-term inflation pressure globally, prompting traders to reassess the outlook for monetary tightening by major central banks.
Rate expectations shift for fed and ecb
Market pricing now implies roughly a 50% chance that the Federal Reserve will cut interest rates by 25 basis points before the end of the year, marking a notable shift from earlier expectations of steady or tighter policy.
Expectations for aggressive European Central Bank tightening have also cooled. While a Bloomberg survey indicates the ECB is still anticipated to raise rates in June as eurozone inflation is forecast to accelerate to about 2.8% this year, the fall in energy costs gives policymakers more room to move gradually.
The easing in energy prices has similarly damped expectations for forceful tightening by other central banks, supporting liquidity conditions and risk appetite in global markets.
Talks between Washington and Tehran in focus
The reopening of the strait is widely viewed as an early confidence-building measure in broader diplomacy between Washington and Tehran. Preparations are underway for a second round of talks over the weekend, which will be critical in determining whether the temporary truce is extended.
Currency and commodity traders are expected to track the talks closely. A sustained improvement in relations could keep oil prices subdued and maintain pressure on the dollar. Conversely, a breakdown in negotiations could quickly reverse recent moves, lifting crude prices and reviving demand for the US currency as a safe haven.
See how shifting macro trends shape crypto too—explore our insights in this Bitcoin and interest rates guide.
Disclaimer: The content on this page is provided for general informational purposes only and does not represent the views or financial advice of Toobit. We make no guarantees regarding the accuracy or completeness of this information and shall not be held liable for any errors, omissions, or outcomes resulting from its use. Investing in digital assets involves risk; users should independently evaluate their financial situation and the risks involved. For further details, please consult our Terms of Service and Risk Disclosure.
