Euro to Dollar Forecast: Volatility Expected as Iran to Shut Strait of Hormuz

June 22, 2025 - Written by Tim Boyer

STORY LINK Euro to Dollar Forecast: Volatility Expected as Iran to Shut Strait of Hormuz

LIVE UPDATE: The Euro to Dollar exchange rate (EUR/USD) found support close to 1.1450 on Thursday and rallied to 1.1530 on Friday amid a fresh glimmer of hope that further escalation in the Israel/Iran war could be avoided with the dollar losing defensive support.

However, Iran's Parliament has voted to close the Strait of Hormuz in response to U.S. strikes on its nuclear facilities. The move does still require approval from the country’s National Security Council before it can take effect.

This development, if confirmed, would have immediate global repercussions. The Strait of Hormuz is a critical chokepoint for global oil shipments, roughly 20% of the world’s oil passes through it daily. A closure would likely send crude oil prices soaring and trigger safe-haven flows into the U.S. dollar, Swiss franc, and Japanese yen.

Commodity-linked currencies such as the Canadian dollar and Norwegian krone could also rally on higher energy prices, while emerging market currencies and oil-importing nations (like India or Turkey) would come under pressure due to rising energy costs and geopolitical risk aversion.

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According to UoB; “The mild downward pressure has faded, and the current price movements are likely part of a range trading phase, expected to be between 1.1470 and 1.1540.”

On a medium-term view, ING commented; “The current USD risk premium already embeds plenty of negatives, and 1.15 can prove the anchor, rather than the starting point for another major rally, at least this year.”


There had been a tentative net improvement in risk appetite as President Trump appeared to signal that there would not be an immediate US attack on Iran’s nuclear facilities.

He indicated that there would be a delay of up to two weeks in order for last-ditched diplomatic efforts to take place.

MUFG commented; “President Trump’s decision to publicly state that he will make his mind up on involving the US in the conflict within the next two weeks has raised optimism that a deal can be done to avoid an escalation. Senior officials from the UK, Germany and France will meet Iranian officials in Geneva today and we are likely to go into the weekend with hope of diplomatic progress.”

There is, however, still a high degree of uncertainty, especially with Trump emphasising the benefit of unpredictability.

Rabobank notes the difficult policy choices; “If he declines to initiate strikes Iran could plausibly sprint for a nuclear weapon that would pose an existential threat to Israel and perhaps encourage Saudi Arabia to pursue nuclear arms of its own.”

It added; “If he conducts limited strikes on Fordo and elsewhere they may not succeed in destroying Iran’s nuclear program and the Hydra’s heads will undoubtedly grow back, leaving America to face the same conundrum again in the future.”

Extensive US action against Iran could have major geo-political and economic ramifications.


There will, therefore, be reservations over aggressive dollar selling, especially ahead of the weekend.

ING is less positive on the dollar; “The FX market has taken the somewhat lower probability of the US intervening in Iran already this weekend as an opportunity to re-enter USD short positions, especially against European currencies.”

It added; “This confirms that a constant flow of oil-positive, risk-negative geopolitical news is needed to keep the dollar supported in an environment where markets retain a strong bias towards strategic USD shorts.”

MUFG noted that the Chinese central bank fixed the yuan stronger than expected.

According to the bank; “The fixings are a strong message that the Chinese authorities will not seek CNY depreciation as an offset to the ongoing trade uncertainties as we approach the key period when reciprocal tariffs are set to be reactivated.”

Chinese resistance to yuan losses would tend to support the Euro in global markets and underpin EUR/USD.

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TAGS: Euro Dollar Forecasts