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. The decline followed the collapse of weekend peace talks between the United States and Iran, after which Washington announced a blockade of Iranian ports.
The euro edged 0.1% higher to $1.1769, while the British pound climbed to a six-week peak of $1.3521. President Donald Trump said Iran still seeks a deal, but insisted any agreement must prevent Tehran from acquiring nuclear weapons. Investors responded positively to signs of potential diplomatic off-ramps, lifting 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 the upbeat mood: Nasdaq futures rose 0.2%, S&P 500 futures held steady after an overnight rally, EUROSTOXX 50 futures gained 0.41%, and DAX futures added 0.6%.
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: Brent crude futures fell 1.5% to $97.90 a barrel, while U.S. crude dropped 2.3% to $96.78. The slide reflected hopes that renewed dialogue could ease the conflict, outweighing concerns over potential supply disruptions from the region.
