On Friday, the dollar ended its first weekly series of declines since the start of the Iran war as the impact of soaring oil prices on inflation prompted central banks to take a tougher stance, InvestingPro writes.
Hopes for an end to the fighting in the Persian Gulf region faded over the weekend as U.S. President Donald Trump threatened to strike Iran’s power grid and Tehran vowed to retaliate against its neighbors’ energy and water systems.
“The market assumption is that countries and economies that experience a positive supply shock from energy are likely to perform better than those that suffer a negative supply shock,” said Rodrigo Catril, currency strategist at National Australia Bank.
“So we see the euro and the yen experiencing difficulties. Again, if this conflict drags on, we can assume that these are the currencies that are likely to be hit the hardest.”
On Saturday night, Trump issued another threat against Iran, less than 24 hours after signaling that the U.S. may be considering winding down the conflict. Iran has vowed to retaliate against infrastructure in neighboring countries and said the shipping channel for oil in the Strait of Hormuz would remain closed.
The prospect of retaliatory strikes on civilian infrastructure in the region threatens the livelihoods of millions of people who depend on desalination plants for water supplies. Since early Sunday morning, air-raid sirens have sounded across Israel warning of approaching missiles from Iran.
