On Thursday, US President Donald Trump escalated the conflict with Iran, stating the US would 'go harder' and warning that two to three more weeks of fighting are likely, while ruling out negotiations. Iran also appears unwilling to engage diplomatically, maintaining control over the Strait of Hormuz [1][3]. Trump's comments dashed hopes of a near-term end to the US-Iran war and signaled continued military action, reinforcing expectations of prolonged disruptions to energy flows through the Strait of Hormuz [2][3].
Markets responded with a strong risk-off tone: oil prices surged sharply, with West Texas Intermediate (WTI) rebounding more than 8% on the day to trade around $103, bouncing off a daily low of $92.49 and snapping a two-day losing streak [2]. Stocks, bonds, and gold tumbled, boosting demand for the US Dollar (USD) [1][3]. The USD/JPY pair traded near 159.40, having surged earlier in the day, while GBP/USD slid toward 1.3200, down 0.40% [1][3]. The British Pound tumbled to fresh two-day lows at 1.3181 before reclaiming 1.3200, and USD/JPY trimmed intraday gains during the American session after reports emerged that Iran is drafting a protocol with Oman to manage and facilitate traffic through the Strait of Hormuz, signaling a potential step toward stabilizing shipping conditions [1][2][3].
Japanese fundamentals continue to weigh on the Yen, as Japan's heavy reliance on imported energy leaves it exposed to rising oil prices, worsening its trade balance and pressuring the currency. Japanese authorities have reiterated warnings about excessive Yen weakness, suggesting intervention risks remain elevated if volatility intensifies, but without a decisive policy shift from the Bank of Japan, these warnings have had limited lasting impact [1]. Meanwhile, the UK is set to convene virtual talks with around 35 countries to discuss a plan to restore shipping through the Strait [2].
Attention is also turning to the OPEC+ meeting on Sunday, where eight members are likely to weigh a further oil output increase, positioning key producers to add more barrels should the Strait of Hormuz reopen [2]. US jobs data was mixed, with jobless claims improving (202,000 vs. estimates of 212,000), while the Challenger report showed companies slashed 60,620 jobs in March, up more than 24% from 2025 figures [3]. Dallas Fed President Lorie Logan said monetary policy is well-positioned to respond to uncertainty and warned that the Middle East conflict clouds the future of the economy [3].
Technical analysis shows USD/JPY consolidating just under the 159.70 resistance area, with buyers in control while momentum stabilizes. GBP/USD retains a mildly bearish near-term bias, slipping below clustered SMAs around 1.3480, with resistance seen near 1.3350 and 1.3480 [1][3].
CONCLUSION
Trump's escalation of the Iran conflict has triggered a sharp surge in oil prices and strengthened the US Dollar, with risk assets under pressure and currency pairs like USD/JPY and GBP/USD reacting accordingly. While headlines about Iran and Oman drafting a protocol for Hormuz traffic have moderated some volatility, market sentiment remains cautious amid ongoing geopolitical risks. The upcoming OPEC+ meeting and continued uncertainty in the Middle East are likely to keep energy and currency markets volatile in the near term.