Latest on the US-Iran war
The situation in the Middle East remains at a stalemate. The White House maintains that peace talks are ongoing despite Tehran’s public rejections. While it seems that Pakistan acts as an intermediary for indirect dialogue, military preparations appear to be intensifying. Reports suggest the Pentagon is weighing a significant campaign involving ground forces and heavy bombing, even considering the diversion of air defense missiles originally intended for Ukraine to bolster Middle Eastern supplies. Amidst the strategy shifts, the human cost continues to rise with the death toll now exceeding 4,500 people. Although there has been a slight decrease in missile frequency toward the UAE, the recent elimination of a high-ranking Iranian naval commander by Israel adds a fresh layer of volatility to an already tense situation.
Economic ripples from the hostilities are being felt globally as the Strait of Hormuz remains effectively closed and oil prices surge toward historic highs. Brent oil crude is again above $100 a barrel, hovering around $106, marking its most significant monthly gain in decades, while American gasoline prices edge closer to the $4 mark. The Iranian parliament is even drafting laws to charge ships for safe passage, further complicating international maritime trade. In response to these soaring costs and dwindling supplies, countries across the Asia-Pacific region are taking drastic measures like releasing national oil reserves or cutting fuel subsidies. The Trump administration is also reportedly now modeling extreme scenarios where oil could potentially hit $200 a barrel, reflecting deep concerns about the long-term damage this stalemate could inflict on the global economy.
The US Dollar is again bid as volatility spikes. For equities, it’s been a bit of a rollercoaster; the S&P500 can’t seem to commit to a direction for more than three days at a time, staying in back-and-forth mode during March. Tomorrow ends the five-day negotiating window, and markets positioning ahead of the weekend is poised for another risk-aversion session, while investors wait on the sidelines to get a clearer direction beyond the next headline.
CAD: Two-month low
The Loonie’s descent to a two-month low suggests that internal economic deceleration is now weighing more heavily on the currency than the support typically provided by favorable terms of trade in energy. Following a cautious tone from the Bank of Canada last week, investors have turned the focus back to a sluggish labor market and economic macro figures that has missed projections. This fundamental weakness is being compounded by bearish sentiment in the futures market, where leveraged funds have flipped to a net-short position on the Loonie, signaling skepticism about a smooth economic transition as financial conditions tighten.
Further pressure stems from geopolitical and trade-related uncertainties. While elevated energy prices are currently the primary pillar of support for the CAD, this makes the currency highly vulnerable to any de-escalation in Middle East tensions. Additionally, the lack of progress in the USMCA renegotiation process ahead of its July 1 renewal marker introduces a layer of political risk, leaving the Loonie struggling to find firm footing against a stronger Greenback.
EUR: Energy shock bites as Germany’s rebound falters
The euro is trading with a heavier tone as the Middle East conflict feeds directly into Europe’s macro outlook. EUR/USD has repeatedly failed at its 21‑day moving average, which continues to roll over, signalling that rallies are still being sold rather than built upon.
The broader backdrop is turning more challenging. The latest Ifo survey underscored how quickly sentiment has deteriorated: the headline index fell to 86.4 from 88.4, with expectations suffering their sharpest drop since Russia’s invasion of Ukraine (90.2 → 86.0). Germany’s long‑awaited cyclical upswing hasn’t been derailed, but it has clearly been delayed. Soaring energy prices and renewed uncertainty have punched a hole in business confidence just as momentum was beginning to build.
Energy security is now the dominant theme. European gas storage is unusually depleted for March — Dutch facilities are only 6% full, Germany sits near 22%, and the closure of the Strait of Hormuz for more than three weeks has kept large volumes of gas off the global market. Italy and Spain are already scrambling to secure additional North African supply, while Brussels has urged member states to begin refilling storage early to avoid a summer price spike.
Against this backdrop, President Lagarde stressed that the ECB will act “decisively and swiftly” if the energy shock risks a broader inflation overshoot. Markets continue to price a meaningful chance of an April hike and almost three hikes in total by year-end. But the policy signal is being overshadowed by a deteriorating growth environment.
For EUR/USD, this leaves the currency trapped between a more vigilant ECB and a worsening terms‑of‑trade shock. Until there is clarity on Hormuz and a stabilisation in energy markets, the euro’s upside remains limited around the $.16 mark and the balance of risks still tilts to the downside.
MXN: Banxico to hold, Peso follows global uncertainty
The ongoing dispute in the Middle East is creating a fragile environment for global markets, and Mexico is feeling the pressure. Hopes for a quick diplomatic fix faded after officials in Tehran rejected claims of active peace negotiations. The situation looks increasingly serious as neighboring nations consider stepping into the battlefield. Because nobody knows exactly what will happen next, financial players are getting nervous and searching for ways to protect their investments from sudden shocks.
This international uncertainty is clearly showing up in how people trade the Peso. While the actual exchange rate has been trading sideways, the most interesting action is happening behind the scenes. Market participants are rushing to buy insurance against a sudden currency drop, pushing the cost of these protective strategies to levels we have not seen in nearly 24 months. Data highlights a massive upward swing in hedging metrics, proving that everyone is bracing for a bumpy ride until the international dust settles.
Domestically, the picture is not offering much support for the currency. Recent numbers revealed an unexpected shrinking in national output at the start of the year, mostly dragged down by a struggling manufacturing sector. Even with a highly positive early start to North American trade agreement reviews, the combination of slowing local growth and climbing global energy costs puts policymakers in a tough spot. Ahead of Banxico meeting today, markets are expecting the central bank to keep its interest rate unchanged to fight off new inflation threats coming from the energy shock. Markets will be keeping high attention to forward guidance and whether there’s any change in monetary policy posture given the mix of inflation threats and unimpressive recent macro data.
Market snapshot
Table: Currency trends, trading ranges & technical indicators
Key global risk events
Calendar: March 23 – 27
All times are in EST
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
