FX.co ★ Euro at Two-Month Low on Middle East Tensions

The euro held just above $1.15, hovering near its weakest level since April 3, as renewed tensions in the Middle East fueled fears of a protracted conflict involving Iran, intensifying inflation worries and weighing on growth prospects. Brent crude jumped more than 4% after Iran and Israel exchanged missile strikes, despite President Trump’s calls for both sides to halt hostilities and engage in peace talks. Investors also prepared for a likely European Central Bank rate hike this week, with markets now pricing in three ECB increases and fully expecting the first as early as June 11. The move comes on the heels of data showing euro-area inflation climbed to 3.2% in May, its highest level in more than two and a half years. Nonetheless, uncertainty persists after Eurozone GDP figures were revised to reveal a contraction in Q1 2026, the first since late 2022 and the sharpest decline since mid-2020.