Euro to Dollar Forecast: EUR Tumbles After Israel Strike on Iran

June 13, 2025 - Written by Frank Davies

STORY LINK Euro to Dollar Forecast: EUR Tumbles After Israel Strike on Iran

Israel’s Iran Strikes Trigger USD Rebound, Euro Retreats Versus US Dollar from 43-Month Highs

The Euro to Dollar exchange rate (EUR/USD) surged to 43-month highs just above 1.1630 on Thursday as the dollar came under renewed pressure.

There was, however, a sharp retreat to lows below 1.1520 on Friday following Israel’s strike on Iran’s nuclear facilities with a surge in geo-political tensions and a spike in oil prices while equity markets retreated.

According to ING; “we think the starting point was already quite rich for the pair, and a return to the 1.14-1.15 seems entirely appropriate.”

Danske Bank noted; “The attack adds significant uncertainty to diplomacy, with US officials denying direct involvement while cautioning that it could either hinder or, unexpectedly, pressure Iran towards discussions.”

The Israeli strikes have added to underlying trade and economic uncertainty. There will inevitably be unease over any escalation while markets are closed with demand for safe-haven assets.

OCBC currency strategist Christopher Wong commented; "Geopolitical noise may temporarily distort the dollar downtrend and temporarily weigh on risk proxies especially heading into the weekend."


According to ING; “The key difference from previous Israel-Iran standoffs is that nuclear facilities have now been targeted, and while oil production does not seem to be affected just yet, markets have to add in a bigger risk premium given the crucial role of Iran in global oil supply.”

Nordea commented; “Geopolitical worries added to the list of potential headwinds for risk appetite, with Israel attacking Iran’s nuclear facilities and Iran retaliating. Oil prices shot up as a result, though from rather low levels.”

It added; “It is worth remembering that geopolitical tensions like these seldom remain the main market driver for a longer time, though as noted, this time they are by far not the only factor causing worries.”

According to ING; “The risks now point more definitively towards a prolonged period of tension, in contrast to recent episodes. And we think this could continue to take some pressure off the dollar.”

There are still doubts whether the dollar can secure sustained support given fundamental concerns and risk of capital outflows.

The Euro has also gained net support from increased speculation that the ECB will decide against further interest rate cuts.

MUFG commented; “The developments could provide a timely test of the US dollar’s traditional safe haven appeal after it hit fresh year to date lows yesterday prior to Israel’s military strikes.”


In this context, the dollar was subjected to further selling pressure on Thursday with further evidence of a softer labour market reinforcing expectations that the Federal Reserve would move close to interest rate cuts.

Continuing jobless claims rose to their highest level since November 2021.

MUFG commented; “we still expect the Fed to be reluctant to cut rates at upcoming policy meetings in June or July until they have more clarity over US trade policy and impact on inflation and labour market.”

It added; “At the same time, the release yesterday of the latest weekly initial and continuing claims have added to concerns that the US labour market is continuing to soften in response to trade disruption and heightened policy uncertainty.”

ING, however, also considers that the dollar is over-sold; “We had felt the USD negative reaction to the soft CPI print was exaggerated, and new geopolitical tensions give the Fed another argument to stay cautious, arguing for that CPI move to be scaled back.”

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TAGS: Euro Dollar Forecasts