EUR/USD Forecast Weighed by Crude Oil, Dollar Upsurge - Currency Pair of The Week

The Hormuz Shockwave and the Dollar's Bid

According to XTB's coverage of the escalation, Iran's attack on commercial vessels in the Strait of Hormuz — including an LNG tanker — ended the 60-day memorandum that had suspended US sanctions on Iranian crude in exchange for toll-free passage through the strait. Washington's response was a large-scale retaliatory strike against more than 80 targets inside Iran, an immediate reinstatement of oil sanctions, and Tehran's subsequent counterattack on sites in Bahrain and Kuwait. By the time President Trump declared the ceasefire "over" at the NATO summit in Ankara, the risk premium had fully returned to FX, draining capital from risk-sensitive currencies and redirecting flows toward the dollar. The cross-asset signal is unambiguous: when crude spikes on supply-chain disruption and the dollar simultaneously strengthens, EUR/USD becomes a clean expression of Europe's terms-of-trade deterioration compounded by relative monetary tightening from the Federal Reserve.

Where the Pain Is Concentrated

The dollar's bid is not discriminating, but the magnitudes tell a clear story about which economies carry the greatest structural exposure to Middle Eastern crude. The Hungarian forint is leading losses (USD/HUF +1.0%, EUR/HUF +0.85%), surrendering the multi-year highs it printed after Peter Magyar's parliamentary election victory as investors price out the optimism that had compressed Hungarian risk premia. The South African rand (USD/ZAR +0.6%) and Indian rupee (USD/INR +0.5%) follow — both economies remain tethered to Gulf crude flows, making them direct casualties of any sustained Hormuz premium. Within the G10 complex, the New Zealand dollar stands apart: the Reserve Bank of New Zealand's recent hike to 2.50% and hawkish guidance from the Governor have anchored the kiwi against the tide, while the Norwegian krone is the other notable outperformer as oil's renewed bid feeds directly into Norway's terms of trade. The euro, lacking any comparable hawkish pivot from the ECB and running a structural energy deficit, finds itself absorbing both the dollar's strength and the oil shock simultaneously.

What We Are Watching

For positioning into the back half of July, the levels that matter for us are the recent EUR/USD lows and whether the cross can defend them on a closing basis; a clean break would confirm that capital flows have decisively favored the dollar leg of the trade. Crude's trajectory on Hormuz-related headlines remains the critical input — any sustained move higher will reinforce the terms-of-trade headwind for the eurozone and deepen the divergence with the energy-independent US. On the central bank side, we are monitoring whether the ECB accelerates its dovish posture in response to weakening growth, or whether Fed rhetoric at upcoming events validates the current hawkish repricing. For now, dollar liquidity absorption continues to dominate, and EUR/USD remains our preferred expression of the gap between US resilience and European vulnerability.