Euro Weakens After Iran Talks Break Down, Trump Moves to Blockade Hormuz

Quick overview

Weekend diplomacy between Washington and Tehran went nowhere, and markets are feeling it Monday morning. The euro is trading at $1.1687, quietly slipping about half a cent from where it closed Friday, with the dollar picking up ground across the board as traders grow cautious.

Negotiations in Pakistan ended without any agreement, and Trump did not wait long before responding. He signed off on a blockade of the Strait of Hormuz, set to kick in at 16:00 CEST today, with Iranian-linked vessels bearing the full weight of the measure.

The strait matters because roughly a fifth of the oil that moves by sea goes through it. Cutting Iran off there hits the country in two places at once, its oil exports and the transit fees it collects from tankers using the passage. Oil jumped on the news. Asian stocks dropped. Frankfurt, Paris and London are all expected to open lower.

That said, some analysts think the market is keeping its head. Commerzbank’s Thu Lan Nguyen made the point that the euro is still nowhere near the lows it hit the last time tensions spiked in the region. Her read is that most traders still think this eventually gets resolved at the negotiating table rather than escalating further.

Hungary was a different story. Orbán’s election defeat on Sunday caught many off guard, and the forint moved fast once results came in. It gained against both the euro and the dollar, settling just below the 368 EUR/HUF mark. Before the weekend, the rate was sitting about ten forint higher, a notable shift for a currency that rarely moves that sharply in a single session.

The economic calendar is quiet to start the week. What happens in the Gulf over the next 48 hours is probably the only thing traders are watching right now.

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Sophia Cruz

Financial Writer - Asian & European Desks

Sophia is an experienced writer, reporter and newsdesk member, mostly on the financial sectors. For the past 5 years Sophia has covered a wide variety of topics such as the financial markets, economics, technology, fin-tech and trading. Sophia has been a part of the FX Leaders team since 2017 and works on producing valuable content and information for traders of all levels of experience.

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