EUR/USD Breaks Five-Day Losing Streak Amid Hopes of End to Middle East Conflict
By Sagar Dua, FXStreet – March 31, 2026
The EUR/USD currency pair snapped its recent five-day losing streak, gaining ground during the Asian trading session on Tuesday by climbing to around 1.1475. The move comes amid softening of the US Dollar (USD) as investors grow increasingly hopeful about a potential resolution to the ongoing conflict involving the United States, Israel, and Iran.
Dollar Weakens on Peace Prospects
The US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, edged lower to near 100.40, reflecting a subtle easing in USD demand. This shift follows reports from the Wall Street Journal indicating that US President Donald Trump is considering bringing the conflict with Iran to an end, a development that has injected fresh optimism into the markets.
President Trump’s willingness to negotiate peace persists despite the Strait of Hormuz—a critical global energy chokepoint responsible for nearly 20% of worldwide energy supply—remaining largely closed. According to the report, Trump does not plan to use military force to reopen the strait, aiming to limit US military involvement to a timeline of four to six weeks.
Implications for Oil Prices and Inflation
The ongoing closure of the Strait of Hormuz is expected to restrict any significant declines in oil prices given the supply risks, which could in turn keep inflation pressures elevated globally. This dynamic may explain why the US Dollar has only seen a modest decline, despite peace hopes that might otherwise have driven a more pronounced sell-off.
High oil prices continue to exert downward pressure on the Euro (EUR), as the Eurozone is heavily reliant on imported energy. This persistent energy cost burden suggests inflation could remain sticky within the bloc, complicating the European Central Bank’s (ECB) monetary policy outlook.
Market Focus on Eurozone Inflation Data
In the midst of this geopolitical backdrop, investors are awaiting key economic data from Europe. The Eurozone’s flash Harmonized Index of Consumer Prices (HICP) for March is scheduled for release at 09:00 GMT. Analysts forecast the headline inflation rate to have accelerated to 2.7% year-on-year, up from 1.9% in February, signaling continued inflationary pressures within the single currency area.
The HICP is closely watched as it provides a harmonized measure of inflation across Eurozone member states, serving as a critical indicator for ECB policy decisions. A higher-than-expected reading typically bolsters the Euro, while a softer print could weigh on the currency.
Broader Market Context and Risk Sentiment
Alongside currency movements, gold prices remain supported above the $4,500 per ounce level, benefiting from increased risk appetite following positive developments in the Middle East situation. However, gains for precious metals are limited by expectations of a hawkish Federal Reserve stance, as policymakers remain vigilant against de-anchored inflation expectations.
Energy prices have been a dominant force in recent market dynamics, with the escalation of tensions in the Persian Gulf triggering classic supply-side shocks—higher inflation expectations, weaker growth outlooks, and pressured equity markets globally.
Central banks worldwide face a delicate balancing act as they respond to surging energy costs. Their policy responses will be pivotal in determining the future trajectory of the global economy, raising concerns about the risks of both under- and over-reacting.
Key Upcoming Events:
- Eurozone Flash HICP Inflation (March) – 09:00 GMT, March 31, 2026
- US JOLTS Job Openings and CB Consumer Confidence Data – Later today
Market participants will keenly watch these releases for further cues on inflation trends and economic momentum on both sides of the Atlantic.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Readers should conduct their own research before making trading decisions.
About the Author:
Sagar Dua has been actively involved in financial markets since his college days and has extensive experience in market analysis and charting. He is a regular contributor to FXStreet, specializing in currency markets.
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