The euro weakened in European trading on Wednesday against a basket of global currencies, resuming losses against the US dollar after a two-day recovery. The single currency moved lower once again toward a three-month low, pressured by escalating geopolitical tensions in the Middle East, particularly after the United States launched a new round of airstrikes against Iran.

Higher oil prices are renewing inflationary pressures on policymakers at the European Central Bank, strengthening expectations that the ECB could raise interest rates by 25 basis points at its June meeting, pending further economic data and confirmation of the inflation outlook.

Price action

EUR/USD today: The euro fell about 0.1% against the dollar to $1.1532, compared with an opening level of $1.1543. The pair reached an intraday high of $1.1552.

The euro ended Tuesdays session up 0.1% against the dollar, marking its second consecutive daily gain as it continued recovering from a nearly three-month low of $1.1500.

US dollar

The US Dollar Index rose approximately 0.1% on Wednesday, resuming gains after a two-session pause and reflecting broader strength in the US currency against major global peers.

The advance was driven by renewed demand for the dollar as a safe-haven asset amid rising geopolitical tensions in the Middle East after the United States launched a fresh wave of airstrikes against Iran. Irans Revolutionary Guard subsequently announced attacks targeting the US Fifth Fleet in Bahrain and American military facilities in Kuwait and Jordan.

Oil prices

Global oil prices climbed more than 1% on Wednesday, rebounding from multi-week lows as concerns resurfaced over the continued closure of the Strait of Hormuz following the latest exchange of military strikes between the United States and Iran.

Latest developments in the Iran conflict

The United States launched new airstrikes against Iran after an Apache helicopter was shot down.

President Donald Trump said the response to the downing of the American helicopter should be very strong.

US Central Command described the strikes on Iran as an act of self-defense.

Iran announced retaliatory attacks against the US Fifth Fleet in Bahrain and military bases in Kuwait and Jordan.

Despite the exchange of strikes, President Trump and Vice President JD Vance reiterated that negotiations toward a comprehensive nuclear agreement remain ongoing.

Iranian Parliament Speaker Mohammad Bagher Ghalibaf stated that Tehran prefers a diplomatic solution to the crisis but also retains stronger alternatives if necessary.

European interest rates

Money markets continue to price in a greater than 90% probability that the European Central Bank will raise interest rates by 25 basis points at its June meeting.

Investors are awaiting additional eurozone data on inflation, employment, and wage growth to refine expectations regarding the ECBs policy path.

Sources speaking to Reuters indicated that an ECB rate hike in June remains highly likely, given inflation projections that are moving toward a less desirable scenario for policymakers.