The U.S. dollar weakened to a 1½-month low of 98.298 against a basket of major currencies on Tuesday, as improving risk sentiment reduced demand for the world’s reserve currency. This decline followed the collapse of weekend peace talks between the United States and Iran, after which Washington announced a blockade of Iranian ports. In this context, the euro edged up by 0.1% to $1.1769, while the British pound climbed to a six-week peak of $1.3521. President Donald Trump stated that Iran still seeks a deal but insisted that any agreement must prevent Tehran from acquiring nuclear weapons.
Investors responded positively to signs of potential diplomatic off-ramps, which lifted MSCI’s broadest index of Asia-Pacific shares outside Japan by nearly 2%, with Japan’s Nikkei gaining more than 2%. Wall Street futures reflected this upbeat mood, with Nasdaq futures rising by 0.2%, S&P 500 futures holding steady after an overnight rally, EUROSTOXX 50 futures gaining 0.41%, and DAX futures adding 0.6%. Meanwhile, the U.S. military began enforcing the port blockade, escalating tensions over the Strait of Hormuz. Trump warned that any Iranian “fast-attack” vessels approaching the blockade would be eliminated and that ships paying Iranian tolls would also be blocked.
Despite the heightened military posture, a U.S.-sanctioned Chinese tanker was reported to have passed through the strait on Tuesday. Oil markets reacted with caution, as Brent crude futures fell by 1.5% to $97.90 a barrel, while U.S. crude dropped by 2.3% to $96.78. This decline reflected hopes that renewed dialogue could ease the conflict, outweighing concerns over potential supply disruptions from the region.
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