Weekly Preview: ECB Interest Rates, Tesla & Google Report Earnings

The EUR/USD pair opened the week on a weaker footing, marking its third consecutive daily decline, as investors continued to favor the US Dollar amid heightened geopolitical tensions and rising inflation risks.

Demand for the US Dollar strengthened after the US military confirmed a ninth consecutive night of strikes targeting Iranian military assets linked to attacks on commercial shipping in the Strait of Hormuz. Reports from regional allies also pointed to renewed attacks over the weekend, reinforcing fears of a broader conflict. The escalating situation has boosted demand for traditional safe-haven assets, lending further support to the Greenback and weighing on the euro.

At the same time, crude oil prices climbed to their highest level since June 12 as concerns over supply disruptions intensified following the closure of the Strait of Hormuz and the US naval blockade of Iranian ports. Higher energy prices have revived fears of persistent inflation, increasing speculation that major central banks—including the Federal Reserve—could maintain a more hawkish policy stance for longer. These expectations have provided an additional tailwind for the US Dollar.

Attention now turns to the European Central Bank's monetary policy meeting on Thursday, which is expected to be the key catalyst for the euro this week. Investors will closely monitor the ECB's policy guidance for fresh clues on the interest rate outlook. In the meantime, ongoing geopolitical developments are likely to remain a major driver of market sentiment, with any further escalation in the Middle East potentially sustaining demand for the US Dollar and limiting upside potential for EUR/USD.

Gold prices regained modest ground at the start of the week, trading above the $4,000 level. The precious metal is attempting to build on Friday's rebound from its monthly low, although the broader outlook remains cautious as persistent geopolitical tensions and expectations of higher U.S. interest rates continue to support the U.S. dollar.

Investor sentiment remains focused on the escalating conflict in the Middle East. The United States confirmed it had completed a ninth consecutive night of military strikes against Iranian targets, with President Donald Trump stating the operations were conducted in response to the deaths of American service members. According to US Central Command, the strikes are intended to weaken Iran's military capabilities used in attacks on commercial shipping and civilian vessels transiting the Strait of Hormuz.

Iran responded by launching ballistic missiles and one-way attack drones targeting US allies across the region, with Bahrain, Jordan, Kuwait, and Iraq reporting fresh attacks. The continued exchange of hostilities has heightened fears of a wider regional conflict, reinforcing demand for safe-haven assets and keeping geopolitical risk firmly in focus.

Meanwhile, energy markets remain under pressure as the United States maintains its naval blockade of Iranian ports and tightens restrictions on Iranian oil exports, while Iran's Islamic Revolutionary Guard Corps continues to monitor and challenge shipping through the Strait of Hormuz. These developments have pushed crude oil prices to their highest levels since June 12, intensifying concerns over renewed inflationary pressures.

With no major US economic data scheduled for release on Monday, market participants are likely to focus on remarks from Federal Reserve officials and further developments in the Middle East.

Oil prices climbed sharply in early Asian trading on Monday after the United States and Iran exchanged another round of military strikes over the weekend, raising concerns about a broader regional conflict and the potential for prolonged disruptions to global crude supplies.

The latest advance followed renewed military action between Washington and Tehran. The US Central Command (CENTCOM) confirmed additional strikes against Iranian targets on Sunday, following an Iranian attack on a US military base in Jordan that reportedly killed two American service members and injured several others.

US forces have expanded the scope of their operations, targeting a broader range of Iranian military sites, while Iran has intensified attacks on US allies across the Gulf region. Despite the widening conflict, both sides remain heavily focused on the strategic Strait of Hormuz, a vital global energy shipping route. According to CENTCOM, the latest US operations were aimed at weakening Iranian capabilities used to target commercial shipping transiting the waterway.

The renewed hostilities mark the most severe escalation between the United States and Iran since the collapse of their April ceasefire, with diplomatic efforts appearing to have stalled completely. Shipping traffic through the Strait of Hormuz remains significantly below normal levels, heightening concerns over supply interruptions and prompting traders to build a larger geopolitical risk premium into oil prices.

While higher US crude production has provided some additional supply, it has not been sufficient to offset tightening global market conditions. Declining inventories and persistent disruptions continue to keep both crude oil and refined fuel markets well supported, reinforcing the bullish outlook for energy prices in the near term.

Wall Street closed sharply lower on Friday, ending a two-week winning streak as a broad selloff in technology stocks weighed heavily on investor sentiment. The continued unwinding of the artificial intelligence rally pushed semiconductor shares into bear market territory, while escalating tensions between the United States and Iran drove oil prices higher and reignited inflation concerns.

The technology sector came under significant pressure early in the session, falling more than 3% after the market opened. Investors reacted to the launch of a powerful new artificial intelligence model by China's Moonshot AI, which intensified concerns over rising competition in the AI space.

Away from the AI sector, Netflix was another major drag on the technology index after the streaming giant released weaker-than-expected revenue and profit guidance for the current quarter. Although the company's latest earnings broadly met expectations, investors expressed concern that slowing growth and intensifying competition could weigh on future performance.

Economic data released on Friday provided a mixed backdrop for financial markets. The University of Michigan's preliminary consumer sentiment index rose to 54.4 in July, its highest reading since February, supported by easing fuel costs and improving consumer confidence. Meanwhile, one-year inflation expectations declined to 4.2% from 4.6% in June, reinforcing signs that inflation had been moderating before the recent spike in energy prices.

However, policymakers continue to emphasize that inflation remains a key concern. Several Federal Reserve officials reiterated that additional policy tightening may still be necessary if price pressures persist, particularly as higher oil prices threaten to reverse recent progress.