FX.co ★ Euro Eases as Middle East Tensions Weigh on Outlook

The euro hovered around $1.14, pulling back from a near one‑month high reached on Tuesday, as investors confronted rising tensions in the Middle East and a sharp increase in oil prices. These developments have intensified worries about inflation and its implications for monetary policy and economic growth.

Energy markets remained volatile after continued US military strikes on Iran, following President Donald Trump’s decision to reinstate a blockade on Iranian shipping. The disruption to energy flows has added another layer of uncertainty for financial markets.

Against this backdrop, the European Central Bank — which raised interest rates in June for the first time in three years — is widely expected to tighten policy further. Futures markets now fully price in a rate hike in September, with another increase projected by spring 2027. Still, recent comments from policymakers such as Piero Cipollone and Martin Kocher have sounded a more cautious note, as they say there is still no clear evidence of second‑round inflation effects.