Greenback Gains as US-Iran Tensions Jolt Markets. Forecast as of 23.06.2025
The long-term outlook for the US dollar remains uncertain, but the escalating conflict in the Middle East is providing support for the US currency. The greenback has once again emerged as a preferred safe-haven asset. Let’s discuss this topic and make a trading plan for the EURUSD pair.
The article covers the following subjects:
Major Takeaways
- US attacks on Iran have increased the risks of a continued rally in Brent quotes.
- Rising oil prices are supporting the US dollar.
- Investors believe that the greenback has once again become a haven.
- Short trades on the EURUSD pair can be considered if the pair slides below 1.149.
Weekly US Dollar Fundamental Forecast
For decades, markets have tended to flee to the US dollar during times of turmoil. However, Donald Trump’s “Liberating Day” has turned American exceptionalism into a “sell America” trend. Only the intervention of the United States in the Israeli-Iranian conflict restored the greenback’s status as a safe-haven asset. The EURUSD pair opened the week with a downward gap amid concerns about potential retaliation from Tehran.
The Iranian parliament has already voted to block the Strait of Hormuz, a key route through which a fifth of the world’s oil shipments pass. The likelihood of this scenario unfolding has increased significantly, driving Brent prices higher.
Probability that Iran blocks Strait of Hormuz
Source: Bloomberg.
The United States is a net exporter of oil, so as the Brent price increases, there is a greater likelihood of accelerating US inflation and maintaining the federal funds rate at 4.5% until the end of the year. The yield differential between US Treasury bond yields and their German counterparts is expected to remain significant, with a possibility of capital flowing from Europe to the US. This is particularly relevant given the deteriorating outlook for the EuroStoxx 600 index due to the crippling European economy.
Therefore, even without its haven status, the US dollar has grounds to strengthen. However, investors have attributed the fall of the EURUSD pair to the return of the US dollar to its safe-haven status. According to the results of the Bloomberg Pulse survey, more than half of the 251 respondents expressed optimism about this outlook. Most experts predict a decline in the USD index at the end of the month. In this connection, does the market have confidence in a swift resolution to the Israeli-Iranian conflict?
Forecasts Regarding Status of US Dollar as Safe-Haven Currency
Source: Bloomberg.
The Brent rally is a bullish factor for the US dollar. If the situation in the Middle East escalates, the EURUSD pair may retreat to 1.14 and 1.13. However, markets tend to adapt quickly to geopolitical shifts. Traders use this unrest to buy the dips, a strategy that can prove particularly advantageous for the major currency pair.
The US administration’s objectives have not changed: to balance the US trade deficit and attract non-residents to purchase US Treasuries. Achieving these goals may be possible by weakening the US dollar. Notably, investors are refraining from engaging in carry trades between the US and European debt markets, reflecting the aversion to US assets.
Weekly EURUSD Trading Plan
The EURUSD pair has filled the gap, which is a favorable factor for bulls. However, the geopolitical landscape is favoring the US dollar. The main currency pair’s inability to settle above 1.149 will signal fading bullish momentum, allowing traders to consider selling the euro in the short term.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
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