EUR/USD rose on Tuesday as the US Dollar eased ahead of a deadline set by US President Donald Trump for Iran to reach a deal or open the Strait of Hormuz. EUR/USD traded near 1.1571, while the US Dollar Index was around 99.90 after failing to hold above 100.

Trump said the US would destroy Iran’s energy and civilian infrastructure if no agreement is reached by 8:00 p.m. Eastern Time (00:00 GMT Wednesday). Iran’s Tehran Times reported that Tehran has suspended all diplomatic and indirect communication channels with the US.

Energy Shock And Currency Impact

Oil prices were already high, and further escalation could lift energy costs and inflation while weighing on growth. The Eurozone, a net energy importer, is more exposed than the US, which is a net energy exporter.

Eurozone inflation data showed the HICP rose 1.2% month-on-month in March, up from 0.6% in February, and annual inflation rose to 2.5% from 1.9%. US CPI later this week is expected at 0.9% month-on-month versus 0.3%, with annual inflation forecast at 3.3% versus 2.4%.

Markets expect the Federal Reserve to hold rates, while pricing up to two ECB rate rises by year-end. New York Fed President John Williams said policy is “well-positioned to wait and see”, and warned the war could add “a tenth or two” to core inflation.

We are seeing a familiar pattern emerge today, reminiscent of the tensions in 2025 surrounding the US-Iran ultimatum. Renewed instability in the Strait of Hormuz is once again pushing energy prices higher and shaping central bank expectations. This playbook suggests the US Dollar is better positioned to handle the shock than the Euro.

Trading And Positioning Implications

Brent crude futures have surged past $95 a barrel this month, a level not seen since the crisis in late 2025. This directly impacts inflation, with the latest US Consumer Price Index for March 2026 coming in at a stubborn 3.4% year-over-year. Meanwhile, Eurostat’s flash estimate for March showed inflation at 2.6%, creating a headache for policymakers in Frankfurt.

The key takeaway is the diverging impact on monetary policy, just as we analyzed last year. As a major energy producer, the United States economy can better absorb higher oil prices, allowing the Federal Reserve to focus purely on taming inflation. The Eurozone, a net energy importer, faces the difficult prospect of both slowing growth and rising prices.

For derivative traders, this dynamic points toward a weaker EUR/USD in the coming weeks. We should consider buying EUR/USD put options to capitalize on a potential decline toward the 1.0500 support level. The rising geopolitical risk also increases implied volatility, making strategies like selling out-of-the-money call spreads attractive.

This policy divergence also presents clear opportunities in interest rate markets. The Fed is now widely expected to delay any potential rate cuts, while the European Central Bank may be forced to pause its tightening cycle sooner than anticipated. This suggests we should position for a widening of the interest rate differential between US and European government debt.

Given that oil is the source of the volatility, positioning directly in energy derivatives is crucial. Buying call options on WTI or Brent crude futures provides a direct hedge and a way to profit from any further escalation. We must remain nimble as the situation can change rapidly, just as it did in 2025.

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The Euro rose against the US Dollar on Tuesday as the Dollar weakened ahead of a US deadline for Iran to reach a deal or open the Strait of Hormuz. EUR/USD traded near 1.1571, while the US Dollar Index was around 99.90 after failing above 100.

Donald Trump set a deadline of 8:00 p.m. Eastern Time (00:00 GMT Wednesday) and warned of attacks on Iran’s energy and civilian infrastructure if no agreement is reached. Iran’s Tehran Times reported that Tehran has suspended all diplomatic and indirect communication lines with the US.

Oil Prices And Inflation Risks

Oil prices remain elevated, and further escalation could increase inflation and reduce growth, with the Eurozone a net energy importer and the US a net energy exporter. Eurozone inflation data showed HICP at 1.2% month-on-month in March versus 0.6% in February, and 2.5% year-on-year versus 1.9%.

US CPI data due later this week is expected at 0.9% month-on-month versus 0.3% in February, and 3.3% year-on-year versus 2.4%. Markets expect the Federal Reserve to hold rates, while pricing in up to two European Central Bank rate hikes by year-end.

New York Fed President John Williams said policy is “well-positioned to wait and see” and estimated the war could add “a tenth or two” to core inflation. ECB policymaker Pierre Wunsch said multiple rate hikes are possible if the Iran crisis continues.

Looking back at the US-Iran deadline in 2025, we recall how geopolitical risk unexpectedly weakened the US dollar. The threat of conflict drove up energy prices, which fueled inflation expectations more than typical safe-haven demand. This forced markets to focus on divergent central bank policies, pushing the EUR/USD pair higher despite the global uncertainty.

We are seeing a similar dynamic today, on April 7, 2026, with ongoing shipping disruptions in the Red Sea. Recent data from the IMF PortWatch shows container shipping through the Suez Canal is still down over 60% year-over-year, adding persistent upward pressure to supply chain costs. While not a direct military deadline, this slow-burning crisis is steadily feeding into the inflation narrative, particularly for an energy-importing Europe.

Policy Divergence And Trading Implications

The latest inflation data from March highlights this divergence, with US CPI remaining sticky at 3.5% while the Eurozone HICP has cooled to 2.4%. This has flipped market expectations from what we saw in 2025. Now, derivative markets are pricing in a higher probability of the European Central Bank cutting interest rates before the Federal Reserve does.

This environment suggests traders should be cautious about assuming a stronger dollar during risk events. The key factor is how these events impact inflation and, in turn, central bank rate paths. Long volatility positions on EUR/USD could be an effective strategy to hedge against this divergence widening unexpectedly.

With Brent crude oil now holding above $90 a barrel, any further escalation in Middle East tensions could cement the Fed’s hawkish stance while complicating Europe’s economic picture. We saw in 2025 how quickly energy shocks can become the primary driver for currency markets. The lesson is that inflation is once again trumping the dollar’s traditional safe-haven appeal.

Therefore, derivative strategies should focus on this policy divergence. Options that profit from a range-bound or slowly appreciating EUR/USD, such as selling out-of-the-money puts, might be prudent. Implied volatility in the currency pair is relatively low, suggesting the market might be underpricing the risk of a sharp move driven by the next inflation print or geopolitical headline.

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Rising oil and petrol prices linked to the Middle East conflict are expected to add to US inflation, with the March CPI report due on Friday. Traffic through the Strait of Hormuz is reportedly increasing, which may limit crude prices in the short term and is linked to backwardation.

Headline month-on-month CPI is expected to rise from 0.3% in February to 1.0% in March. That would be the biggest monthly gain since June 2022, shortly after Russia’s invasion of Ukraine.

Inflation Signals From Services And Fuel

The ISM Services Prices Paid index rose from 63.0 in February to 70.7 in March, the highest since October 2022. The one-month increase was the largest since 2012.

AAA daily petrol prices per gallon rose 36.2% in March, and continued to rise each day so far in April. ISM Services employment data is referenced as a possible signal of weaker jobs conditions.

FOMC minutes from March are due on Wednesday and may show differing views on the policy outlook. The March 2026 median dot was 3.375%, implying one rate cut this year, with an assumption of a weak labour market.

We are seeing a familiar pattern as renewed tensions in the Strait of Hormuz have pushed WTI crude futures above $95 a barrel, a level not sustained since late last year. This situation mirrors the oil shock we navigated back in the spring of 2025, which complicated the Federal Reserve’s path. The key difference now is that the market has less conviction that the Fed will look past the energy-driven price spike.

Market Positioning And Policy Risk

Last year in 2025, we saw the headline monthly CPI jump dramatically in March due to a similar energy price surge. Therefore, with gasoline prices nationally up nearly 15% in the last month to an average of $3.95/gallon according to the latest EIA data, we should anticipate a hot March 2026 CPI print this week. This makes positioning for an upside surprise through inflation swaps or options on TIPS ETFs a compelling strategy.

This creates a difficult situation for the Federal Reserve, just as it did throughout 2025 when they struggled to balance inflation against signs of a softening labor market. With the Fed’s next decision looming, implied volatility is on the rise, with the VIX index recently breaking above 18 for the first time this year. Traders should consider buying protection or speculating on wider market swings through options on the SPX or VIX futures.

The risk of stagflation, where inflation rises while economic growth slows, is now more pronounced than it has been in over a year. The latest ISM Services employment index dipped back into contraction territory, reminding us of the similar downturn signals we saw in the spring of 2025. This suggests considering downside hedges through index put options, while simultaneously looking at call options on energy sector ETFs to play the direct impact of higher crude prices.

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Rising oil and petrol prices linked to the Middle East conflict are expected to lift US inflation, with the March CPI report due on Friday. Traffic through the Strait of Hormuz was reported to be picking up, which may cap crude prices in the short term.

Headline month-on-month CPI is forecast to rise from 0.3% in February to 1.0% in March. If realised, this would be the biggest monthly increase since June 2022, after Russia’s invasion of Ukraine.

The ISM Services Prices Paid index rose from 63.0 in February to 70.7 in March, the highest since October 2022. The one-month increase was the largest since 2012.

AAA daily petrol prices per gallon rose 36.2% in March and continued to rise each day so far in April. Consumer confidence has not yet shown a notable reaction, while the ISM Services employment index was cited as a potential signal of weaker jobs conditions.

Minutes from the March FOMC meeting are due on Wednesday and may show disagreement on the policy outlook. The median 2026 dot released in March was 3.375%, implying one rate cut this year, with assumptions tied to a weak labour market and recent NFP data.

Rising oil prices are again becoming a major concern, pushing WTI crude toward $88 a barrel and putting upward pressure on gasoline. The upcoming March CPI report this week is expected to show inflation remains stubbornly high, with some economists forecasting a 0.4% month-over-month increase. This environment creates significant uncertainty for the market.

We saw a similar situation unfold back in the spring of 2025 when a conflict in the Middle East caused a sudden inflation scare. Back then, the headline monthly CPI was projected to hit 1.0%, a figure not seen since mid-2022. That period of volatility taught us how quickly energy shocks can alter the Federal Reserve’s path.

The impact is already visible at the pump, with the national average for a gallon of gasoline now at $3.75, up nearly 9% in the last month alone. This mirrors the sharp 36.2% price jump we tracked in March of 2025. Such increases act as a direct tax on consumers and could dampen sentiment in the weeks ahead.

Yesterday’s ISM Services report is another warning sign, as the Prices Paid index jumped to 65.1, its highest reading in over a year. This indicates that price pressures are building strongly in the service sector, which is a key focus for the Fed. We are also seeing the employment component of that index begin to soften, suggesting a potentially weaker job market ahead despite recent strong reports.

Given the surprisingly robust NFP jobs report from last week showing over 250,000 jobs added, the Fed is likely to sound more hawkish. The minutes from their last meeting will be closely watched for any hints of delaying rate cuts. According to the CME FedWatch Tool, the market has already priced out a summer rate cut, pushing expectations toward the end of the year.

This renewed inflation and rate uncertainty suggests traders should anticipate higher market volatility. Options strategies that profit from price swings, such as long straddles on the SPX, could become more attractive. The VIX, currently trading around 16, may see a significant spike following this week’s inflation data.

For interest rate products, the risk is that rates will remain higher for longer than previously expected. Traders might consider buying puts on Treasury bond ETFs like TLT or using SOFR options to hedge against the Fed holding off on cuts. The narrative has shifted from how many cuts we will get to whether we will get any at all this year.

In commodities, continued geopolitical tension in the Middle East supports a bullish outlook for oil. Call options on WTI or Brent futures offer a direct way to speculate on further price increases. Traders could also look at options on energy sector stocks, which typically benefit from a rising crude price environment.

Gold prices stayed stable amid mixed geopolitical news, including reports of a potential 45-day ceasefire and renewed threats linked to reopening the Strait of Hormuz. The metal is described as being in a corrective phase, with US 10-year real yields hovering near 2% acting as a headwind.

With no clear de-escalation in the Middle East conflict, the near-term outlook points to range-bound trading with a tilt to the upside. Any breakout depends on further changes in geopolitical conditions.

In the near term, gold is expected to move within a USD 4500-5000 range. Recovery is expected to remain limited unless real yields fall or the US dollar shows sustained weakness.

Gold appears to be stuck in a corrective phase, primarily because high US 10-year real yields are limiting its appeal. The recent March 2026 inflation report coming in at 3.8% reinforces the idea that the Federal Reserve will not be cutting rates soon, keeping those yields firm around 2%. This creates a strong headwind, capping gold’s price recovery.

Despite this, there is a clear upward bias due to simmering geopolitical risks. We saw this last week with renewed threats concerning the Strait of Hormuz, a critical oil chokepoint. This tension provides a floor for the gold price, as any escalation would likely send investors flocking to safety.

For derivative traders, this suggests a period of range-bound action between roughly $4,500 and $5,000. Selling volatility through strategies like iron condors or strangles could be effective, collecting premium as the market weighs high yields against geopolitical fears. This approach profits from the price staying within this expected channel.

To position for the upward skew, we are considering bull call spreads. This strategy offers a cost-effective way to benefit if gold trends towards the $5,000 level without committing to a full-blown breakout. It is a defined-risk trade that aligns with the current outlook of a capped but positive-leaning market.

We saw a similar pattern in the fall of 2025, where geopolitical headlines caused brief spikes that quickly faded. For this reason, anyone holding short positions might consider buying cheap, far out-of-the-money call options. This acts as a prudent hedge against a sudden flare-up that could push gold through the top of its range.

Any breakout beyond $5,000 will need a fundamental shift in the market. A sustained rally remains unlikely until we see a significant retreat in US real yields or a consistent weakening of the US dollar. Until then, gold’s potential for a major recovery will remain limited.

Gold has stayed relatively stable amid mixed geopolitical news, including reports of a potential 45-day ceasefire and renewed threats linked to reopening the Strait of Hormuz. The metal is described as being in a corrective phase.

US 10-year real yields hovering near 2% are weighing on gold and limiting recovery. The lack of a clear de-escalation in the Middle East is adding uncertainty.

In the near term, gold is expected to trade within a USD 4500-5000 range. Price direction is expected to depend on further geopolitical developments and possible US dollar weakness.

A breakout is framed as dependent on shifts in geopolitics, a retreat in real yields, or sustained dollar softness. Otherwise, upside moves are expected to remain limited.

Gold appears to be in a holding pattern, caught between supportive geopolitical risks and the heavy pressure of high US real yields. With US 10-year real yields firm around 1.95% as of early April 2026, any major price advance is being stifled. This creates a range-bound environment where the metal is likely to trade sideways.

We saw a similar dynamic play out in 2025, when conflicting reports about a ceasefire and threats in the Strait of Hormuz kept gold pinned. Even then, the dominant force capping the upside was the persistent strength in real yields. This historical pattern reinforces our current view that yields remain the primary obstacle for gold bulls.

Given this outlook, selling out-of-the-money puts near the bottom of the expected USD 4,500-5,000 range is a viable strategy for collecting premium. This approach benefits from the current environment, as implied volatility on gold options has recently eased to a three-month low of 16%. The strategy capitalizes on the view that strong underlying support will prevent a significant price breakdown.

To position for the upside skew, traders can consider using bull call spreads. This defined-risk strategy allows for participation in a potential breakout, which would likely be triggered by a weakening of the US dollar from its current index level of 106 or a new geopolitical flare-up. The options market shows the six-month call-put skew remains positive, indicating a continued bias for upside exposure over the medium term.

Underlying this entire picture is the steady demand from the official sector, which continues to provide a solid floor for the market. Central banks added a net 88 tonnes to reserves in the first quarter of 2026, continuing a trend of strong buying seen throughout the last few years. This consistent purchasing strengthens the case for selling puts on dips toward the USD 4,500 support level.

TD Securities’ commodity team says ongoing disruption in the Persian Gulf and blocked flows through the Strait of Hormuz are keeping oil markets tight. It states that crude oil, petroleum products and LNG could face tighter supply-demand conditions while flows remain frozen.

The team forecasts oil prices could rise by $50 or more if the war continues for weeks. It also projects that, even if hostilities end soon, deficits and low inventories could keep energy prices elevated well into 2027.

TD Securities expects $90–100 crude to persist for the foreseeable future. It adds that inventory rebuilding demand from countries such as China and Japan could add to pressure on supplies.

The article notes it was produced with assistance from an artificial intelligence tool and reviewed by an editor.

Given the prolonged disruption in the Persian Gulf, we believe oil is positioned for another sharp move up. The continued blockage of the Strait of Hormuz keeps the market exceptionally tight, making bullish strategies attractive. Traders should consider buying call options to capitalize on a potential surge of $50 or more in the coming weeks.

This outlook is supported by the latest Energy Information Administration (EIA) data, which showed a larger-than-expected inventory draw of 4.2 million barrels last week. With Brent crude already trading over $120 per barrel, the physical market is confirming a severe supply crunch. These conditions suggest the current surge in energy prices has not yet run its course.

Market uncertainty has pushed the CBOE Crude Oil Volatility Index (OVX) to its highest levels since the conflict began in late 2025. This elevated volatility makes buying options expensive. Therefore, using call debit spreads could be a more cost-effective way to gain upside exposure while limiting premium decay.

Even if the conflict ends, we expect prices to remain high well into 2027, establishing a new floor around $90–100 per barrel. Drained strategic reserves, particularly in China and Japan, will create sustained demand as nations rush to replenish their stocks. Selling far-dated puts with strike prices around $85 could be a way to collect premium based on this high price floor.

The impact also extends to LNG, with the lack of Qatari cargoes causing European natural gas prices to climb above €160 per megawatt-hour. This is creating a similar supply-driven rally that we have seen in crude oil. Consequently, bullish positions in natural gas futures or options could offer a related trading opportunity.

TD Securities’ commodities team says extended disruption in the Persian Gulf, with blocked flows through the Strait of Hormuz, could push oil prices higher. It adds that supply conditions for crude oil, petroleum products and LNG could tighten while the route remains frozen.

The team expects production to weaken and inventories to fall if the blockage continues. It says these factors could keep energy prices rising if the conflict lasts longer than expected.

Potential Price Surge Scenario

It estimates prices could jump by $50 or more if the conflict is not resolved in the coming weeks. It also projects that, even if fighting ends soon, prices could stay high due to deficits and low inventories.

The team forecasts $90–100 crude could continue well into 2027. It notes that countries such as China and Japan may seek to rebuild inventories quickly.

The article states it was created using an Artificial Intelligence tool and reviewed by an editor.

Given the prolonged conflict in the Persian Gulf, we believe the path of least resistance for oil prices is sharply higher. With flows through the Strait of Hormuz down nearly 80% since the blockades began in late 2025, the market is being starved of millions of barrels per day. This ongoing supply shock suggests that the recent surge in energy prices has much further to run.

Risk Management And Volatility Outlook

Traders should consider positioning for another significant move upward in the coming weeks. We see a strong case for buying crude oil futures and call options, as a price surge of $50 or more is a distinct possibility if the situation does not de-escalate. This scenario is reminiscent of the market reaction we saw in 2022 after Russian supplies were disrupted, which pushed Brent crude briefly over $130 per barrel.

The supply crisis is made worse by critically low global inventories, which provide no buffer. The latest March 2026 report from the Energy Information Administration showed US strategic reserves are at a 50-year low, a situation mirrored across most of the OECD. Consequently, any resolution would likely trigger a massive restocking effort from countries like Japan and China, underpinning high prices.

Even if a ceasefire were announced tomorrow, we would advise against taking significant short positions. The damage to production infrastructure and the time required to refill the supply chain means deficits will persist well into 2027. We see a new floor for crude oil prices forming in the $90–$100 per barrel range for the foreseeable future.

The extreme uncertainty will keep volatility elevated, making options a valuable tool for managing risk and capturing upside. The Cboe Crude Oil Volatility Index (OVX) has been consistently trading above 45, levels not sustained since the initial shock of the conflict last year. This environment favors strategies that benefit from large price swings, but the primary risk remains skewed towards a sudden and dramatic price spike.

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Societe Generale reported that Sweden is the only G10 economy forecast to grow faster than the United States this year. It also said markets expect interest rate rises from all G10 central banks except the US Federal Reserve.

The report noted that the Swedish Krona (SEK) is the weakest G10 currency so far this year. It linked this to recent underperformance versus other G10 currencies, despite Sweden’s growth forecast.

Societe Generale said the SEK could be a candidate to buy if a ceasefire were announced. The article was produced using an artificial intelligence tool and checked by an editor.

Last year, we noted that Sweden was forecast to be the only G10 economy that would outgrow the US. Despite this strong outlook, the Swedish Krona was the weakest G10 currency at the time. The thinking was that any positive geopolitical news would make the SEK a strong candidate to buy.

That growth story did materialize, with Sweden’s economy expanding by 2.8% in 2025, just outpacing the US’s resilient 2.5% figure. As expected, the Riksbank raised its policy rate to a high of 4.25% in November 2025 to fight inflation. The SEK saw a brief rally when geopolitical tensions eased in January, but the gains did not hold for long.

The situation has now inverted as we move through April 2026. The impact of those previous rate hikes is becoming clear, with Sweden’s latest manufacturing PMI for March falling to 48.5, indicating a slowdown. The market is now pricing in a greater than 60% probability of a Riksbank rate cut by June.

For derivative traders, this means positioning for potential Krona weakness in the near term. Buying EUR/SEK call options would allow traders to profit from a weakening SEK, with risk limited to the option’s premium. Selling the SEK through forward contracts against the euro or dollar is another way to position for the Riksbank potentially cutting rates before other major central banks.

Societe Generale reported that Sweden is the only G10 economy forecast to grow faster than the United States this year. It also said markets expect interest rate rises from all G10 central banks except the US Federal Reserve.

The Swedish Krona (SEK) was described as the weakest G10 currency so far this year. This was set against Sweden’s stronger growth forecast compared with the United States.

The note stated that, if a ceasefire were announced, SEK would be a candidate to buy. The reason given was Sweden’s growth outlook and the currency’s recent weakness versus other G10 currencies.

The piece was created with help from an artificial intelligence tool and reviewed by an editor. It was attributed to the FXStreet Insights Team, which selects market commentary from external experts and adds analysis from internal and external analysts.

Last year, we saw a strange situation where the Swedish Krona was weak even though Sweden’s economy was expected to grow faster than the US. This disconnect has largely carried over into early 2026, creating a tension in the market. The currency still seems undervalued when you look at the underlying economic strength.

Recent data supports the view that Sweden’s economy is outperforming its peers. First-quarter GDP growth for 2026 came in at a solid 0.8%, easily beating the Eurozone average of just 0.3% for the same period. Furthermore, inflation remains a challenge, with the latest March reading showing a CPIF rate of 3.1%, which is still well above the Riksbank’s 2% target.

This economic picture suggests the Riksbank will have to maintain a hawkish stance, especially compared to other central banks like the Federal Reserve, which appears to be on a prolonged pause. Historically, when a central bank is more aggressive on interest rates than its peers, its currency tends to strengthen. We are seeing market odds increase for another Riksbank rate hike before the summer.

For derivative traders, this points toward positioning for SEK strength in the coming weeks. Buying call options on the SEK, particularly against the euro, could be a good strategy to capture potential upside while managing risk. A move in the EUR/SEK exchange rate from its current highs around 11.60 back toward the 11.20 level seen in late 2025 seems increasingly plausible.