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Risk assets fell while the dollar and oil prices jumped sharply. The moves came amid another round of strikes between the US and Iran, renewing fears of supply disruptions. The drop in risk assets reflects the market's now-familiar reaction to regional escalation, but the scale of the fighting this time has notably exceeded previous episodes.
US media reported that the United States carried out new missile strikes on Iran on Sunday, reinforcing the now-familiar pattern of strikes and counterstrikes between Washington and Tehran. This was the fourth US attack on Iran in roughly a week and followed one of the most powerful bombardments since the June ceasefire agreement. US Central Command said on Saturday that its forces struck about 140 targets on orders from President Trump, and on Sunday it added several dozen more targets, including Iranian air defense systems, coastal radar stations, and missile and drone capabilities.
Iran did not stand idle: its retaliatory actions unfolded on multiple fronts. Iran's IRNA news agency reported that IRGC forces seized two vessels they deemed a threat to navigation for travelling on an illegal route in the strait. Iranian forces also used missiles and drones to strike missile depots and fuel reserves at Prince Hassan air base in Jordan, where, Jordanian authorities said, three rockets landed. US Central Command confirmed that the Cyprus-flagged vessel M/V GFS Galaxy sustained serious damage and was unable to continue its voyage; one crew member is reported missing.
Especially alarming is that Iran's counterstrikes have spread well beyond bilateral US-Iran clashes. Iran launched drone and missile attacks on US allies across the region, including Bahrain, Kuwait, and Qatar. Kuwait said a drone strike damaged a Kuwait Oil Co. drilling platform and reported that it responded to aerial attacks after Iran's regular military announced drone strikes.
The main point of contention remains the status of the Strait of Hormuz, and the parties continue to offer conflicting accounts. Iran announced over the weekend that the strait would be closed "until further notice." US Central Command disputed that claim, saying the waterway remains open to all vessels and that US forces are prepared to ensure freedom of navigation. The IRGC, for its part, said it would not allow any ship to pass through the strait while foreign interference continues.
As noted above, risk assets reacted to all of this with a decline.
Technical outlook for EUR/USD
Buyers now need to consider taking the 1.1410 level. Only that would allow targeting a test of 1.1425. From there, a move to 1.1445 is possible, but achieving that without support from large players would be difficult. On the downside, I expect significant buying only around 1.1385. If there is no demand there, it would be better to wait for a refresh of the low at 1.1365 or to open long positions from 1.1346.
Technical outlook for GBP/USD
For pound buyers, the near resistance to take is 1.3390. Only a break above that would allow targeting 1.3425, above which further gains will be rather difficult. The farther target is the 1.3450 area. On the downside, bears will try to seize control of 1.3350. If they succeed, a break of that range would deal a serious blow to bullish positions and push GBP/USD down to about 1.3325 with the prospect of extending to 1.3295.
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