FX.co ★ Euro Rebounds on Iran War Optimism

The euro strengthened in early April, rising toward $1.16 and pulling away from the seven-month lows hit in mid-March, after US President Donald Trump stated that the United States could withdraw from Iran within “two or three weeks,” regardless of whether an agreement with Tehran is reached. This recovery followed a turbulent March, during which the euro fell 2.2% against the US dollar—its weakest monthly performance since July 2025—amid mounting tensions in the Middle East. Even so, the crisis in the Strait of Hormuz remains unresolved, with the effective closure of this key shipping route continuing to disrupt oil supplies and push prices higher. The persistent uncertainty and growing inflation concerns have led markets to reassess the likely trajectory of European Central Bank policy. Investors now expect fewer than two interest rate increases in 2026, down from as many as three projected in mid-March, having already abandoned earlier pricing of a 40% probability of a rate cut prior to the outbreak of the conflict.