Dollar Slides as Hormuz Signals Ease Middle East Risk Premium

Mintesinot Nigussie

The U.S. dollar posted a broad decline on Friday and was set for a second consecutive weekly fall, as financial markets reacted to developments around the Strait of Hormuz and shifting expectations over the trajectory of the Middle East conflict. The dollar index dropped 0.49 percent to 97.73, touching its weakest level since February 27.

On a weekly basis, the index was down about 1 percent, extending losses that have reached roughly 2.5 percent over the past two weeks. Geopolitical signals centred on the Strait of Hormuz influenced sentiment after Iranian Foreign Minister Abbas Araqchi said the waterway was open to all commercial vessels for the remainder of a 10-day U.S.-brokered truce.

U.S. President Donald Trump later wrote on Truth Social confirming the announcement. Market reaction was swift across commodities, with U.S. crude falling 11.53 percent to 83.77 US dollars a barrel and Brent crude dropping 10.65 percent to 88.80 US dollars.

Currency traders said the moves reflected a market still heavily driven by headlines tied to the conflict. Expectations of monetary easing in the United States also supported broader dollar weakness. Pricing for a 25 basis point interest rate cut by the Federal Reserve at its December meeting rose to 44.9 percent.

Sterling gained 0.37 percent to 1.3574 US dollars, reflecting improved risk sentiment in currency markets. In Japan, the dollar weakened 0.63 percent to 158.18 against the yen after earlier rising to 159.86.

Overall, the dollar’s slide as Hormuz signals ease the Middle East risk premium highlights how geopolitical developments continue to drive currency and commodity market movements.