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The EUR/USD pair moved lower to around 1.1690 during early Asian trading on Tuesday, as the Euro weakened against the US Dollar amid escalating geopolitical tensions in the Middle East.

Market sentiment turned cautious after Iran reportedly launched drones and missiles at the United Arab Emirates following a series of attacks on commercial vessels. The developments have heightened concerns over a broader regional conflict. According to reports, the United States responded by sinking Iranian boats in the Strait of Hormuz, while President Donald Trump warned of severe retaliation if US-protected ships were targeted.

Rising geopolitical risks have boosted demand for safe-haven assets, underpinning the US Dollar and putting pressure on the EUR/USD pair. Investors are now focusing on the US April ISM Services Purchasing Managers Index (PMI), scheduled for release later , for further directional cues.

On the European side, hawkish signals from European Central Bank policymakers may help limit downside pressure on the Euro. Bundesbank President Joachim Nagel indicated that the ECB could consider raising interest rates in June if the inflation outlook fails to improve meaningfully in the coming weeks.

The ECB left interest rates unchanged at its most recent meeting, noting that while the inflation outlook remains broadly stable, upside risks to inflation and downside risks to economic growth have increased.

Gold prices declined sharply on Monday, falling around 2% as escalating tensions between the United States and Iran strengthened the US Dollar and reinforced concerns that inflation could remain elevated.

Market sentiment was pressured after reports that Iran targeted multiple vessels in the Strait of Hormuz and ignited a UAE oil port, marking a significant escalation in regional conflict.

A stronger dollar typically makes dollar-denominated commodities such as gold more expensive for holders of other currencies, weighing on demand. At the same time, rising energy prices have intensified inflation concerns, reinforcing expectations that central banks may maintain higher interest rates for longer.

Investors are now turning their attention to a series of key US economic releases this week, including job openings data, the ADP employment report, and the monthly nonfarm payrolls figures, which could provide further direction for both interest rate expectations and gold prices.

In other precious metals, silver fell over 3%, while platinum and palladium also posted notable losses.

Oil prices rallied sharply on Monday, as escalating tensions in the Middle East heightened concerns over supply disruptions.

The gains followed reports that Iran intensified military actions over the past 24 hours, targeting vessels in the Strait of Hormuz and igniting a UAE oil facility. The developments mark the most significant escalation since a US-Iran ceasefire took effect in early April.

According to regional officials, the UAE activated air defense systems to intercept incoming drones and missiles, while emergency crews responded to a fire at a major oil zone. At the same time, the US military said it had destroyed several Iranian boats and intercepted missiles and drones, as part of efforts to secure shipping routes through the strategic waterway.

The Strait of Hormuz remains a critical chokepoint for global energy markets, historically accounting for roughly 20% of worldwide oil and liquefied natural gas flows. Any disruption to transit through the corridor raises immediate concerns over supply constraints and price volatility.

Further adding to tensions, Iran’s Revolutionary Guards signaled an expansion of its operational reach near the strait, including areas close to key UAE ports. Meanwhile, conflicting reports emerged over whether commercial vessels had successfully transited the route under US protection.

On the supply side, the UAE signaled its intention to maintain production levels in line with global demand, despite its recent exit from OPEC. Meanwhile, OPEC+ confirmed plans to increase output targets by 188,000 barrels per day in June for several member countries, marking a third consecutive monthly increase.

U.S. equities ended lower on Monday, with the S&P 500 pulling back from record highs as escalating tensions in the Middle East unsettled investor sentiment despite a strong first-quarter earnings season.

The downturn followed reports of an explosion aboard a South Korean merchant vessel in the Strait of Hormuz, reinforcing concerns that the key shipping route remains vulnerable. The incident, alongside broader geopolitical developments, tempered optimism that had recently driven major indexes to all-time highs.

Market participants remain cautious, particularly given elevated valuations. Analysts noted that with equities trading near record levels, downside risks may be more pronounced in the event of further geopolitical escalation.

Corporate earnings have continued to provide underlying support. S&P 500 companies are now expected to deliver aggregate earnings growth of around 28% year-over-year for the first quarter, significantly higher than earlier forecasts, with much of the strength driven by large-cap technology firms.

In corporate developments, logistics stocks came under pressure after Amazon announced plans to expand its supply chain services to external clients.

Elsewhere, GameStop shares fell after the company unveiled a proposal to acquire eBay in a cash-and-stock deal, while eBay stock moved higher on the news.