The euro slipped to just below $1.18, retreating from last week’s three-week high, as investors weighed escalating tensions in the Middle East against the European Central Bank’s cautious stance. US President Donald Trump confirmed that the two-week ceasefire between Washington and Tehran will expire on Wednesday evening. At the same time, Iran’s state broadcaster IRIB denied reports that an Iranian delegation had traveled to Pakistan for talks with the US, contradicting earlier claims.
In the Eurozone, investor sentiment fell to its lowest level since December 2022 amid mounting concerns that the conflict could disrupt energy supplies and broader supply chains. ECB President Christine Lagarde warned that the Eurozone’s economic outlook “remains deeply uncertain” as the Middle East conflict, including the blockade of the Strait of Hormuz, undermines Europe’s energy security. She described the resulting supply shock as “enormous.” Although recent energy price moves have not yet triggered the ECB’s worst-case scenario, Lagarde emphasized that the outlook remains fragile.
