The euro fell in European trading on Monday against a basket of global currencies, extending its losses for the second consecutive day against the US dollar, as investors continued buying the US currency as a preferred safe-haven asset amid the escalation of the war in the Middle East.

Tensions between the United States and Iran have intensified over the Strait of Hormuz, a development that is currently driving global energy prices higher, in a crisis that is casting a negative shadow over the European economy.

Price Overview

Euro exchange rate today: the euro fell 0.35% against the dollar to $1.1532, down from the session opening level of $1.1570, after reaching a high of $1.1570.

The euro ended Fridays session down 0.15% against the dollar, retreating from a one-week high of $1.1616 recorded in the previous session.

The euro rose 1.35% against the dollar last week, marking its first weekly gain in the past three weeks, supported by the European Central Banks hawkish meeting.

US dollar

The dollar index rose more than 0.2% on Monday, extending its gains for the second consecutive session, reflecting the continued strength of the US currency against a basket of global currencies.

The rally comes as investors focus on buying the dollar as a preferred safe-haven asset amid the escalation of the war in the Middle East, especially after US President Donald Trump threatened to strike Irans electricity grid if Tehran does not reopen the Strait of Hormuz, while Irans Revolutionary Guard pledged to respond by targeting infrastructure in neighboring Gulf countries.

Israel announced launching large-scale strikes on Iran, while Saudi Arabia reported that the Iranian military fired two ballistic missiles toward Riyadh.

Global energy prices

Oil and gas prices rose on Monday at the start of the weeks trading, extending gains that began late last week, due to the escalation of the military conflict around the Strait of Hormuz and disruptions to supplies from the Gulf region.

Fatih Birol, Executive Director of the International Energy Agency, warned that the current crisis poses a serious threat to the global economy and is worse than the energy crisis that occurred in the Middle East during the 1970s.

Rodrigo Catril, a currency strategist at National Australia Bank, said the market tends to believe that countries and economies with surplus energy supplies are likely to outperform those facing shortages.

Catril added that the euro and the yen are therefore struggling to perform, and if the conflict in the Middle East persists for an extended period, both currencies are likely to come under greater pressure.

European interest rates

The European Central Bank kept interest rates unchanged last week for the sixth consecutive meeting.

Sources told Reuters that the European Central Bank is likely to begin discussing interest rate hikes next month.

Following the meeting, money markets increased pricing for a 25-basis-point rate hike by the European Central Bank at the April meeting from 1% to 25%.

To reassess these expectations, investors are awaiting further economic data from the eurozone on inflation, unemployment, and wage levels.