Berenberg: Strait of Hormuz Attacks - FJElite

EUR/USD is trading below the 1.16 mark again this morning and is currently trading at around 1.1550. The US dollar is receiving support primarily from the renewed rise in oil prices, which have climbed back towards USD 100 per barrel following attacks on several ships in the Gulf. According to maritime authorities, three ships were attacked this morning. Unknown projectiles struck two oil tankers south of Basra in Iraq, causing fires and forcing the crews to evacuate. In addition, a container ship was hit north of the port of Jebel Ali in Dubai. The incidents occurred on the same day that 32 countries unanimously voted to release 400 million barrels of oil in response to what the International Energy Agency described as an unprecedented situation on the energy market. After the attacks, Tehran spokesman Ebrahim Zolfaqari said that people should prepare for an oil price of USD 200 per barrel, as it was heavily dependent on regional stability, which had been destabilized by Western measures. Overall, recent events underscore the ongoing military risks in the Middle East and are putting additional upward pressure on energy prices, which is providing further support for the US dollar in the short term. The US inflation data released yesterday was largely in line with previous market expectations. Core inflation excluding food and energy fell slightly in February from 0.3 percent in January to 0.2 percent. Lower prices for used cars and auto insurance helped to ease inflationary pressures last month, although the cost of gasoline and food, including fresh vegetables and coffee, rose. Overall, inflation has been on a downward trend in recent months after remaining stubbornly high for an extended period last year. At the same time, however, new inflation risks from the war with Iran are causing uncertainty, as rising costs for oil, gasoline, and fertilizers could reignite concerns about the cost of living in the US ahead of this year’s midterm elections. Against this backdrop, the Federal Reserve is expected to leave key interest rates unchanged at its meeting next week, an assessment that already prevailed in the market before the latest developments in the Middle East. Flowever, if the conflict leads to further increases in energy prices, some investors now see the possibility that the Fed could keep interest rates unchanged for longer than previously assumed. At the same time, however, monetary policymakers must also keep an eye on the continuing fragile situation on the US labor market.