- The impact of oil on exchange rates has increased considerably.
- The ECB promises to avoid a repeat of the inflationary shock of 2022.
Donald Trump has a formidable competitor. A tweet by US Energy Secretary Chris Wright about the US military escorting oil tankers through the Strait of Hormuz caused a real stir in the markets, as did its subsequent removal. Previously, only the White House could claim such influence over investors. However, when nerves are frayed, even a small piece of information can shake the markets.
Investors are still wondering when this will all end. Donald Trump's comments about the imminent conclusion of the conflict in the Middle East suggest a 12-day war scenario, similar to that of the summer of 2025. However, the IEA's plan to sell oil from strategic reserves, on the contrary, echoes the events of 2022.
According to Christine Lagarde, the eurozone is better prepared for an energy crisis than it was then. The ECB will prevent the war between the United States, Israel and Iran from causing the same inflationary pain to the monetary bloc. In 2022, the European Central Bank raised rates by 450 basis points in response to skyrocketing energy prices, which pushed inflation from 5.9% to 10.6%. Deposit rates are now higher, but inflation remains lower.
Markets are beginning to price in two ECB rate hikes in 2026. The expected scale of the Federal Reserve's monetary policy easing has decreased from 65 to 36 basis points due to the conflict in the Middle East. In theory, the reduction in the rate differential should cause a rebound in the . However, investors doubt that the eurozone economy can withstand rising borrowing costs and energy prices.
In the initial stage of the confrontation, the US dollar gained popularity due to fears in financial markets, its status as a safe haven asset, and the United States' position as a net energy exporter. However, as the conflict in the Middle East drags on, the US economy will be affected by rising oil and gasoline prices. Consequently, investor interest could shift towards the Canadian dollar and the Norwegian krone.
The FxPro Analyst Team
