Dollar Falls as Trump Delays Iran Strike – Market Relief
The dollar weakened Monday after U.S. President Donald Trump announced a delay in potential military strikes against Iran, following what he described as “very quality talks” between the two countries. The announcement, made on Trump’s Truth Social platform, came hours before a self-imposed deadline for Tehran to “fully open” the Strait of Hormuz.
Trump directed the Department of Defense to postpone “any and all” military strikes targeting Iranian power plants and energy infrastructure for five days. The move eased immediate concerns about a potential escalation of conflict, now entering its fourth week, and prompted a slight rally in risk assets.
Currency markets reacted swiftly. The dollar dropped 0.7 percent against the euro and 0.6 percent against the yen immediately following Trump’s post, ultimately settling down 0.53 percent against the euro at $1.163. Against the yen, the dollar weakened 0.6 percent to 158.27, retreating from the 160 yen level that had prompted speculation about potential intervention by the Bank of Japan. Sterling rose 0.92 percent to $1.3464.
The dollar index, which tracks the U.S. Currency against a basket of peers, fell 0.6 percent to 98.94. The index had previously recorded its first weekly decline since the start of the conflict on Friday, influenced by rising oil prices and a shift towards more hawkish monetary policies by central banks.
Global stock and energy markets also saw a recovery following Trump’s comments. Brent crude oil, the international benchmark, was down around 9 percent at $101.50 a barrel, after earlier falling to $96.
Analysts cautioned that the market relief could be temporary. “This says ‘strikes on energy infrastructure.’ What about the rest – do the Iranians twiddle their thumbs for five days, and what about Israel? We find so many questions here that are unresolved,” said IG strategist Chris Beauchamp. “Yes, markets have reacted positively. But it doesn’t change the fact that the Straits are still closed.”
Elias Haddad, global head of markets strategy at Brown Brothers Harriman, noted the uncertainty surrounding the talks. “It is still unclear whether the talks were merely intended to calm markets or a bona fide de-escalation.”
According to a report from Axios, Trump’s special envoy Steve Witkoff and Iranian Foreign Minister Abbas Araghchi held separate meetings with representatives from Turkey, Egypt, and Pakistan. Iran’s Foreign Ministry acknowledged “initiatives” aimed at reducing tensions, as reported by the Mehr news agency.
Steven Englander, head of global G10 FX research and North America macro strategy at Standard Chartered in New York, suggested the market reaction reflected a reduced risk of immediate conflict. “The market is looking at this thing saying maybe some of the near-term danger in the energy side is falling off since they won’t be bombing each other’s infrastructure within the next couple of days,” he said. “It is not saying that the worst is over, but that the odds that the worst will manifest itself in the next couple of days have gone down.”
Japanese Prime Minister Fumio Kishida is currently balancing regional issues with the potential for wider conflict during meetings with Trump, according to the Foundation for Defense of Democracies.