The positive momentum follows the outbreak of open military confrontation between the United States and Iran. Experts warn that if hostilities persist for weeks or months, the Strait of Hormuz—through which up to 20.0% of global oil traffic passes—could remain blocked for an extended period, while production and refining infrastructure across the Persian Gulf may suffer significant damage. This would drive energy prices sharply higher and slow global economic growth. Such a scenario would directly affect the future course of US Federal Reserve policy. Most analysts believe the Fed would opt to keep interest rates at current levels to combat rising inflation, a view supported by January CPI data remaining above the 2.0% target (headline inflation at 2.4%, core at 2.5%), while core producer price inflation accelerated from 3.3% to 3.6%. Some analysts do not rule out a return to a more dovish stance and an expansion of the money supply to support funding of the Republican administration’s foreign policy. However, amid open confrontation between President Donald Trump and the Federal Reserve leadership, such a shift appears unlikely. At 16:45 (GMT+2), February manufacturing PMI data will be released; preliminary estimates suggest a decline from 52.6 to 51.7 points, which could put pressure on the US currency.
Eurozone
The euro is weakening against the pound and the US dollar, while showing mixed dynamics versus the yen.
The single currency remains under pressure amid the US–Iran confrontation and the resulting blockage of the Strait of Hormuz. Following the start of the Russia–Ukraine conflict, the EU abandoned energy supplies from Russia and largely shifted to imports of Middle Eastern liquefied natural gas. If tensions in the Persian Gulf are not resolved soon, Italy, Belgium, and Poland are likely to suffer the most, as they are the most dependent on supplies via this maritime route. In addition, a renewed rise in inflation and an economic slowdown are expected, which could prompt the European Central Bank (ECB) to resume interest rate cuts to support growth. At the same time, February manufacturing PMI data published today were broadly positive: the euro area index rose from 49.5 to 50.8 points, while Germany’s PMI increased from 49.1 to 50.9, confirming a transition toward recovery in the industrial sector. However, amid heightened geopolitical tensions, this data has been insufficient to support the euro.
United Kingdom
The pound is strengthening against the euro and the yen, while showing mixed performance against the US dollar.
Today’s February manufacturing PMI showed a decline from 52.0 to 51.7 points, whereas analysts had expected no change. Investors also received housing market data from the Nationwide Building Society: house prices rose by 0.3% month-on-month versus forecasts of 0.2%, and by 1.0% year-on-year compared with expectations of 0.7%. Meanwhile, Bank of England policymaker Alan Taylor said today that the regulator may soon no longer face a trade-off between supporting a slowing economy and combating inflationary pressure, as inflation in 2025 and early 2026 has come in below earlier projections, while unemployment has risen and wage growth has slowed.
Japan
The yen is weakening against the pound and the US dollar, while showing mixed dynamics against the euro.
February manufacturing PMI data published today showed an increase from 51.5 to 53.0 points, above expectations of 52.8. However, escalating geopolitical tensions in the Middle East could place significant pressure on the industrial sector. Analysts warn that if the US–Iran conflict becomes prolonged, rising energy prices would negatively affect Japan’s import-dependent economy, complicating efforts by the Bank of Japan to tighten monetary policy. Nevertheless, Deputy Governor Ryozo Himino struck an optimistic tone today, stating that policymakers would maintain a hawkish stance, though he offered no clear guidance on the timing of the next rate hike.
Australia
The Australian dollar is strengthening against the yen and the euro, while showing mixed dynamics against the pound and the US dollar.
Investors and forex traders are focused on business activity data. In February, the manufacturing PMI declined from 52.3 to 51.0 points, below forecasts of 51.5. Overall, the industrial sector continues to expand, albeit more slowly than expected, and there are no signs of a contraction yet. These figures are unlikely to alter the stance of the Reserve Bank of Australia (RBA), which is expected to maintain a hawkish bias. Most analysts believe the central bank will adopt a wait-and-see approach in March to assess the impact of previously implemented measures, before raising interest rates by 25 basis points to 4.00% at its May meeting—a move currently priced in by traders with an 80.0% probability.
Oil
Oil prices are rising sharply amid the escalation of the US–Iran conflict in the Middle East.
As experts had anticipated, the outbreak of hostilities led to the immediate blockade of the Strait of Hormuz by Iran, through which around 20.0% of global oil supplies flow. Currently, roughly 150 vessels within the strait are unable to continue their transit. In addition, production and refining infrastructure is being damaged not only in Iran but also in other major producers, including Saudi Arabia, where one of Saudi Aramco’s facilities has reportedly been hit. Analysts suggest that if the confrontation enters a prolonged phase, Brent crude oil prices could surge to the range of 130.0–150.0 dollars per barrel.
