Oil Prices Drive Inflation Fears
Oman evacuated all vessels from its Mina Al Fahal oil export terminal as a precaution, Bloomberg reported on Thursday. Iran began what it described as its most intense operation since the war began and stepped up efforts to disrupt the Strait of Hormuz. Further tension could increase demand for safe-haven currencies such as the Swiss Franc. US data due on Friday include the January Personal Consumption Expenditures Price Index and the second estimate of fourth-quarter GDP. We are seeing the US Dollar gain against the Swiss Franc as rising oil prices fuel inflation worries. Brent crude futures have recently climbed above $110 a barrel, a level not seen in over a year, increasing pressure on the Federal Reserve to delay any rate cuts. This environment favors a stronger dollar in the short term. The escalating conflict in the Middle East, with Iran’s actions in the Strait of Hormuz, is the main driver of this uncertainty. While this currently supports the USD via higher oil prices, we must remember that the Swiss Franc is also a traditional safe-haven currency. We saw a similar dynamic in late 2025 where both currencies strengthened during initial shocks.Key Risk Events Ahead
Traders should be cautious ahead of Friday’s US PCE inflation data. The last core PCE reading for December 2025 came in at a stubborn 3.1%, well above the Fed’s target. A surprisingly low number this week could quickly reverse the dollar’s recent gains and challenge the current uptrend. Given this conflicting tug-of-war, purchasing volatility through options strategies appears prudent. Implied volatility on USD/CHF one-month options has already jumped to a six-month high of 9.5%. Strategies like straddles or strangles could benefit from a significant price move in either direction, whether from a hot inflation report or a major geopolitical escalation. Next week’s Federal Reserve meeting on March 17-18 is widely expected to result in a rate hold, but the accompanying statement will be critical. The market has already adjusted, with futures now pricing in less than a 40% chance of a rate cut by June, down from 70% a month ago. Any hawkish language from the central bank could add further fuel to the dollar’s rally. Create your live VT Markets account and start trading now.
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