EUR/USD Drops Amid War Risks
The euro weakened again against the US dollar amid growing market concerns about the escalation of the war in Iran. Risk-off sentiment has investors seeking refuge in the US dollar, while the euro is pressured by concerns that a prolonged conflict in the Middle East could worsen the eurozone's growth prospects. Reuters reported that the dollar strengthened as investors sought safe assets, while the euro and pound also weakened against the greenback amid concerns about Middle East tensions.
Pressure on the euro is increasing because the European region is considered more vulnerable to spikes in energy prices. If the conflict in Iran disrupts oil and gas supplies through strategic routes such as the Strait of Hormuz, global energy costs could potentially rise and depress European economic activity. ECB official Yannis Stournaras called fears of a eurozone recession "real and justified" due to the Iran war, high energy prices, and increasing uncertainty.
On the other hand, the US dollar continues to receive support from expectations that the Federal Reserve will hold interest rates high for longer. The risk of inflation due to rising energy prices has made the likelihood of an interest rate cut increasingly questionable. This situation strengthens the dollar's position because the divergence between US and European monetary policies remains a major concern for market participants.
For the EUR/USD, this situation creates dual pressure: the euro is weighed down by risks to European growth, while the dollar is supported by safe-haven demand and expectations of high interest rates. As long as tensions with Iran remain unabated, the EUR/USD pair has the potential to remain on the defensive. However, if strong signs of de-escalation emerge, pressure on the euro could ease and appetite for riskier assets could recover. (CP)
Source: Newsmaker.id
