FX.co ★ Euro Falls as US-Iran Tensions Escalate

The euro slipped below $1.17, pulling back from Friday’s six-week high of $1.174, as hopes for a US-Iran peace agreement faded. Talks in Pakistan broke down after Tehran rejected Washington’s demands, and neither side showed much appetite for returning to the negotiating table. Market anxiety intensified when US President Donald Trump threatened to impose a naval blockade on the Strait of Hormuz and floated the idea of limited military strikes against Iran, despite an existing ceasefire. The renewed tensions around the strategically vital shipping route sent oil prices surging, with Brent crude rising to about $102 per barrel, and prompted investors to anticipate a more hawkish European Central Bank. Traders are now pricing in at least two ECB interest rate hikes by the end of 2026.