Euro to Dollar Forecast: Energy Shock Pushes EUR/USD Below 1.14

Modified: Monday, 27 July 2026 10:01 BST - Written by David Woodsmith

STORY LINK Euro to Dollar Forecast: Energy Shock Pushes EUR/USD Below 1.14

The Euro to Dollar exchange rate (EUR/USD) fell below 1.1400 to three-week lows as surging oil and gas prices increased concerns over the Eurozone growth outlook.

Escalating conflict between the US and Iran has strengthened the Dollar and left energy markets and bond yields as the dominant near-term drivers.

EUR/USD Forecasts: Watching the energy complex

UBS forecasts that the Euro to Dollar (EUR/USD) exchange rate will strengthen to 1.18 by the end of the year with a rate of 1.20 by mid 2027.

It did, however, warn over an alternative scenario; “A prolonged escalation of the Iran conflict, which is not our base case, could deplete strategic oil reserves and drive energy prices higher, leading to demand destruction in Europe. This scenario could see EUR/USD falling toward 1.10.”

EUR/USD dipped to 3-week lows below 1.14 during the week amid a spike in oil prices on Middle East fears as the US and Iran traded attacks. US and Euro-Zone yields moved higher while the ECB held interest rates at 2.25%.

Energy prices and yields are likely to dominate in the short term.

The Federal Reserve will announce its latest interest rate decision this week with rates expected to be held at 3.75%, but any guidance will remain a key element.

Rabobank commented on the Middle East situation; The president says he still wants to negotiate, but added that the Iranians are unwilling to make a deal at the moment. So, Trump told Axios that he is seriously considering a “massive attack. Bigger than ever before.” Growing risks of all-out war have seen Brent futures surge past $100 per barrel again – but that arguably understates what is at risk here.”

According to MUFG; “The US dollar gained broadly yesterday but we certainly see increased downside risks for the euro and the pound if the energy markets continue the current pace of increases. One energy space that looks increasingly different is the natural gas market with prices surging and already hit the peaks in March.”

According to the bank, the break below 1.14 is liable to lead to further losses.

In contrast, Scotiabank expects yield trends will undermine the US currency; “We maintain a broadly bearish USD outlook primarily driven by expectations for Fed easing, with 50bps of cuts forecast in the first half of 2027.”

It added; “Cyclical risks are material as we continue to highlight the US economy’s ‘twin deficits’ (trade, fiscal). And we also see potential for longer-term pressures resulting from global rebalancing flows as investors seek to diversify their overallocations to US (and USD) markets following an extended period of USD (and US market) outperformance.”

MUFG, however, is still backing the US currency; “The US economy looks better placed to deal with this latest geopolitical risk upturn and if confirmed in the data will likely see this US dollar move extend further.”

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TAGS: Euro Dollar Forecasts