The rapid increase in energy prices poses a threat to global growth, with economists warning that prolonged conflicts would further amplify the economic impact

International News via Reuters:

The dollar gained for a third consecutive session on Thursday, staying close to its strongest levels this year as surging crude prices stoked inflation worries, which could potentially force central banks to reassess the need for interest-rate hikes.

The rapid increase in energy prices poses a threat to global growth, with economists warning that prolonged conflicts would further amplify the economic impact.

Unsurprisingly, the world’s biggest energy importers have seen their currencies post the largest losses against the dollar since the start of the war. The euro and the Korean won have lost 2% to 3%, while the Indian rupee and Japanese yen have lost more than 1.5% each.

Meanwhile, the dollar has risen by more than 1.5% against a basket of major currencies and is close to its highest level since November, thanks in part to its safe-haven appeal, but also because the United States is a net energy exporter.

“Those currencies which are larger net energy importers will likely weaken versus those are who are not,” Joey Chew, head of Asia FX research at HSBC in Singapore, said.

Brent crude futures rose more than 10% at one point to highs of $101.59 per barrel, even after the International Energy Agency on Wednesday agreed to release a record 400 million barrels of oil from strategic stockpiles to combat the spike in crude prices.

Oil market volatility has continued to climb, with Iran saying the world should be ready for crude at $200 a barrel as its military attacked merchant ships on Wednesday, and vessel traffic through the Strait of Hormuz dwindled to a trickle.

The euro slipped 0.2% to $1.154, nearing its lowest level since November, while the yen briefly depreciated past the 159-per-dollar mark and was approaching its weakest level since July 2024.

The pound fell 0.2% to $1.338, a little above its weakest point of the year so far.

CENTRAL BANK RATE TRIGGER DRAWS CLOSER

U.S. President Donald Trump said on Wednesday that Washington was in “very good shape” in its war on Iran, and that the U.S. was “going to look very strongly at the Straits.”

However, three sources familiar with the matter said U.S. intelligence indicated that Iran’s leadership was still largely intact and was not at risk of collapse anytime soon, after nearly two weeks of relentless U.S. and Israeli bombardment.

Iran appeared to have set ablaze two tankers in Iraqi waters as it stepped up attacks on oil and transport facilities across the Middle East, raising the number of ships struck in the region since fighting began to at least 16.

“President Trump keeps on saying, even overnight, that the war will end soon – it’s unclear to us that it’s really up to him,” said Rodrigo Catril, a currency strategist at National Australia Bank in Sydney.

“We should expect ongoing volatility in energy prices,” he said in a podcast.

Risk appetite took a further hit after Trump’s administration on Wednesday launched a new trade investigation into excess industrial capacity in 16 major trading partners, in a move aimed at rebuilding tariff pressure after the U.S. Supreme Court struck down the centerpiece of Trump’s tariff program last month.

More tremors rippled out from the world of private credit, this time from Swiss private equity company Partners Group, which the Financial Times cited on Thursday as saying default rates in the sector could double over the next few years.

The potential for another energy-price shock prompted traders to reassess their views on interest rates. The swaps market on Thursday showed that traders expect the European Central Bank to raise rates possibly as soon as June, while the U.S. Federal Reserve could leave it until September before cutting rates, from a previous expectation for July, according to data compiled by LSEG.

Reporting by Gregor Stuart Hunter; Editing by Kevin Buckland and Pooja Desai

The dollar has risen about 2% against the euro since February-end on a flight to safe-havens – was 0.4% higher against the euro on Wednesday

International News via Reuters:

The dollar strengthened against the euro and the yen on Wednesday as investors remain on edge over further escalation in the Middle East conflict that has driven up energy prices worldwide as Iran struck tankers and energy storage facilities in fresh attacks.

The dollar has risen about 2% against the euro since February-end on a flight to safe-havens – was 0.4% higher against the euro on Wednesday. Those gains eased earlier in the week on brief hopes that the conflict, which started nearly two weeks ago when the U.S. and Israel struck Iran, would be resolved.

Iran’s military command said on Wednesday the world should be prepared for oil to hit $200 a barrel, as three more ships came under attack in the blockaded Gulf. 

Oil prices gained more than 4% on Wednesday as fresh attacks on ships in the Strait of Hormuz worsened supply disruption fears, and analysts said the International Energy Agency’s proposal for a record release of 400 million barrels of oil reserves is inadequate to ease those fears.

“The war in Iran and the impact on energy prices is still the predominant focus for FX,” Kyle Chapman, FX markets analyst at Ballinger Group in London, said.

“Optimism around a near-term end to the war appears to be fading again as Iran is striking vessels and attempting to mine the Strait of Hormuz.”    

The U.S. military “eliminated” 16 Iranian mine-laying vessels near the key shipping artery of the Strait of Hormuz on Tuesday, the U.S. Central Command said in a statement, as President Donald Trump warned that any mines laid in the strait by Iran must be removed immediately.

Against the yen, the dollar was 0.5% higher at 158.90 yen.

INFLATION CHECK

U.S. consumer prices rose moderately in February, according to data released Wednesday, as rents maintained a steady pace of increases, though households paid more for gasoline and at the supermarket.

However, in light of the surge in energy prices, traders were looking past that data to concerns about inflation in coming months.

“(The report) is not relevant at the moment … the current price action, the move in rates we’ve had recently is much more of a forward-looking story,” said Shahab Jalinoos, head of G10 FX research at UBS.

“What would happen if energy prices globally stay elevated? What would be the spillover effects from that, how would that feed through into core CPI as well as headline CPI? These are the questions the market is thinking about,” Jalinoos said.

A jump in inflation in coming months would make it hard for the Federal Reserve to cut rates further, investors said.

“While today’s inflation numbers give the market some relief, we could very well be facing some nasty inflation prints in the months to come which the Fed may, or may not, be able to look through,” John Kerschner, global head of securitized products and portfolio manager at Janus Henderson Investors, said in a note.

The Australian dollar was up 0.4% on the day at $0.7149, supported by growing expectations for the Reserve Bank of Australia to hike rates next week.

The risk-sensitive currency faring well, even as market volatility spiked and positioning has been crowded, was notable, Jalinoos said.

The British pound was about flat on the day at $1.3414 in a choppy session driven by fears of an oil supply shock. Oxford Economics estimated that UK inflation could be 0.4 percentage points higher if shipping through Hormuz was disrupted for up to two months.

Leading cryptocurrency bitcoin rose 1% to $70,794 but remained close to the multi-year low touched in early February.

Reporting by Saqib Iqbal Ahmed in New York; Additional reporting by Niket Nishant in London and Ankur Banerjee in Singapore; Editing by Jamie Freed, Edwina Gibbs, Alexander Smith and Nick Zieminski