FX.co ★ Euro Little Changed as Traders Assess Middle East Developments

The euro held steady around $1.18, trading only marginally below the pre-conflict levels reached last week, as markets digested renewed setbacks in US–Iran negotiations. Tensions increased over the weekend after the US Navy fired on and boarded an Iranian-flagged cargo vessel. The move marked a sharp reversal from Friday, when Iran’s foreign minister had pledged that the strait would remain fully open to commercial traffic during the 10-day ceasefire between Israel and Lebanon. Uncertainty also persists over whether US and Iranian officials will meet before the current 14-day ceasefire between the two countries expires on Tuesday. Meanwhile, the ECB is due to meet later this month, with no change in borrowing costs anticipated at this upcoming decision. Market attention is instead fixed on the June meeting, though the rapidly evolving situation in the Middle East could reshape the outlook. On Friday, the IMF said it expects the ECB to raise rates by about 50 basis points in 2026 in order to preserve a neutral policy stance.