Asia and Europe Were More Skeptical About Developments in the Strait of Hormuz than the US

Key Takeaways

• US halted planned Iran strike, easing immediate conflict risk.
• Dollar regained losses; 10‑year Treasury yields rose above 4.6%.
• Oil stays above $102 per barrel despite Hormuz uncertainty.
• Europe and Asia doubt Strait of Hormuz will reopen soon.
• G7 talks strained by US tariff threats and Russian oil waiver.

Pulse Analysis

The U.S. decision to call off a planned strike on Iran has been welcomed as a constructive step toward de‑escalation, yet the market reaction underscores lingering uncertainty. The greenback quickly recovered, erasing most of the dip seen after the initial news, while Treasury yields firmed, reflecting investors’ appetite for safety amid geopolitical ambiguity. Traders continue to price a modest, under‑33% probability that the Strait of Hormuz will fully reopen by the end of next month, a key chokepoint for global oil flows that keeps crude prices anchored above $102 per barrel.

Currency markets painted a mixed picture. The euro snapped a five‑day slide, briefly touching $1.1660 before settling near $1.1615, while the yen extended the dollar’s longest rally of the year, hovering just above ¥159.15. Sterling nudged higher, breaking a six‑session decline to trade around $1.3450, and the Canadian and Australian dollars showed modest rebounds after recent weakness. Emerging market currencies such as the yuan and rupee faced pressure, with the offshore yuan slipping below CNH6.81 and the rupee hitting a new record low near INR96.6, reflecting broader risk‑off sentiment.

Beyond the immediate price moves, the broader macro backdrop remains fraught. The G7 finance summit concluded with heightened tensions as the United States threatened higher tariffs on EU vehicles and unilaterally extended a waiver on Russian oil, drawing criticism from European capitals. These policy frictions, combined with upcoming data releases—U.S. pending home sales, Canada’s CPI, and the UK’s labor market—will shape central‑bank outlooks and could further influence bond yields and currency trajectories. Investors will be watching for any shift in U.S. policy toward Iran and the Strait of Hormuz, as even modest changes could ripple through energy markets, trade flows, and global growth forecasts.