The euro ended March near 1.15, after falling by more than 2% against the dollar during the month. This was its worst monthly performance in nearly a year, following conflict linked to Iran and an energy shock.<\/p>\n
EUR\/USD peaked near 1.16 in early April after reports that the US might wind down its military campaign in Iran. It then retreated as the US administration provided no clear timeline for a resolution.<\/p>\n
A revised quarterly path includes a possible low around 1.13 in Q2 and a rise to 1.18 in Q4. This path depends on easing hostilities and normalising oil prices.<\/p>\n
Market pricing has shifted to a little more than two European Central Bank rate hikes in 2026, from zero before the conflict. The expectation in the note is for the ECB to remain on hold rather than tighten during a supply shock.<\/p>\n
Future outcomes are linked to the Strait of Hormuz and energy flows. A swift de-escalation points to 1.18\u20131.20, while a blockade lasting into the summer refill season could derail the recovery and push the pair below mid-March lows.<\/p>\n
With the EUR\/USD trading near 1.1350, we see the recent weakness as directly tied to the ongoing conflict in Iran, which has pushed Brent crude prices above $110 a barrel. We believe the market’s response, now pricing in over 60 basis points of European Central Bank hikes for 2026, is an overreaction. This aggressive pricing creates a clear opportunity, as the ECB is unlikely to tighten policy into an energy-driven economic slowdown.<\/p>\n
The most immediate risk is that tensions in the Strait of Hormuz escalate further, with maritime insurance premiums for the region having already jumped 15% in the last month alone. To manage this downside, traders should consider buying put options with a strike price below the mid-March lows. This provides a cheap hedge if a swift de-escalation does not happen and oil prices remain stubbornly high.<\/p>\n
Our central view remains a gradual recovery toward 1.18 by the fourth quarter, assuming the geopolitical risk eventually fades. Given that implied volatility is at a one-year high, making options expensive, using call spreads is a more cost-effective strategy to position for this rebound. This approach allows traders to target a recovery later in the year while limiting the upfront cost during this period of peak uncertainty.<\/p>\n
We have seen the ECB act cautiously before, most notably during the 2022 energy shock when it avoided aggressive tightening that would have harmed the economy. With recent consumer confidence figures from Germany already showing a sharp 5-point drop last month, we expect the ECB will resist the market’s pressure to hike. Traders should closely monitor upcoming statements from ECB officials for any commentary that pushes back against the market’s hawkish expectations.<\/p>\n
The next several weeks are crucial, as Europe’s summer gas refill season begins with storage levels currently at 54%, well below the five-year average for early April. A key signal for increasing bullish positions would be any news of U.S. de-escalation or an unexpected supply increase from OPEC+. However, a persistent blockade would challenge this entire recovery outlook and likely push the euro lower.<\/p>\n","protected":false},"excerpt":{"rendered":"
Euro slumped over 2% in March amid Iran-linked energy shock; outlook hinges on de-escalation, oil prices.<\/p>\n","protected":false},"author":103,"featured_media":0,"comment_status":"","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-46872","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/46872","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/103"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=46872"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/46872\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=46872"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=46872"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=46872"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}