Geopolitical tensions in the Strait of Hormuz have intensified, with US President Donald Trump announcing that the US military would assist in freeing stranded vessels in the region. Reports indicate that two American-flagged cargo ships have crossed the waterway, but other ships have experienced fires and explosions, and an oil port in the United Arab Emirates (UAE) has been hit, allegedly by Iranian missiles [2][3]. Iran's Parliament Speaker Mohammad Bagher Ghalibaf stated that a 'new equation' has solidified the closure of the Strait of Hormuz, blaming the US and its allies for violating the ceasefire and imposing a blockade [2][3].
These developments have pushed oil prices to long-term highs, with West Texas Intermediate (WTI) trading above $101 and Brent above $110 per barrel [2][3]. The surge in oil prices is supporting oil-exporting currencies like the Canadian Dollar (CAD), which remains steady above 1.3600 against the US Dollar (USD), trading at 1.3515 at the time of writing [3]. Conversely, the Japanese Yen (JPY) is under pressure due to Japan's reliance on oil imports, with USD/JPY reaching session highs near 158.00, despite recent intervention by Japanese authorities to support the Yen as it crossed the 160.00 mark [2].
The US Dollar is experiencing mixed performance across major currencies. Against the Swiss Franc (CHF), USD/CHF edged lower to around 0.7830, down 0.07% on the day, as safe-haven demand for the CHF offsets subdued Swiss inflation and expectations that the Swiss National Bank (SNB) will keep rates unchanged [1]. The CHF's safe-haven status is being reinforced by the current geopolitical uncertainty [1]. Meanwhile, the USD is the strongest against the Japanese Yen, up 0.30% on the day, while it is down 0.07% against the CHF and 0.08% against the CAD [1].
On the macroeconomic front, Switzerland's Consumer Price Index (CPI) rose by 0.3% month-on-month in April, below expectations, while manufacturing activity showed solid expansion with the SVME Manufacturing PMI at 54.5 [1]. In the US, upcoming data releases include the ISM Services PMI and JOLTS Job Openings, with the Nonfarm Payrolls and Canadian Employment figures scheduled for Friday [3].
Analysts note that the Swiss inflation outlook remains moderate, giving the SNB room to keep rates unchanged, while the US Dollar is supported by rising Treasury yields and expectations of further monetary tightening, as highlighted by Minneapolis Fed President Neel Kashkari, who stated that additional rate hikes cannot be ruled out due to inflationary pressures linked to higher energy prices in the context of the Iran war [1]. However, the Greenback's advance is limited against safe-haven currencies like the CHF [1].
CONCLUSION
Escalating US-Iran tensions have driven oil prices higher, impacting major currencies and reinforcing safe-haven demand for the Swiss Franc. The US Dollar is mixed, gaining against the Yen but losing ground to the CHF and CAD. Market sentiment remains cautious, with upcoming economic data releases likely to influence further moves.