Rising Energy Costs Deepen Pressure on EUR/USD
The euro came under renewed pressure as a sharp rise in global energy prices bolstered the US dollar and intensified concerns over the Eurozone’s economic outlook.
The EUR/USD pair has slipped significantly since the start of the week, touching the level of 1.1530 in yesterday's trading—the lowest position since November 2025. The move follows a spike in global energy prices triggered by escalating tensions involving Iran, amplifying risks for the energy-dependent Eurozone economy.
A brief rebound during the New York session proved short-lived. In Asian trading on Tuesday (March 4), selling pressure resurfaced, with EUR/USD hovering around 1.1600 and EUR/JPY slipping below 183.00. Among major crosses, only EUR/GBP showed relative resilience as the United Kingdom is similarly exposed to rising fuel costs.
Brent crude prices have climbed roughly $10 per barrel compared with last week, while benchmark European natural gas prices have surged by about 70% over the same period. The combined jump in oil and gas prices has serious consequences for the single currency.
In the near term, Eurozone countries are expected to allocate more funds to cover higher energy import bills. Because global energy transactions are largely denominated in US dollars, rising prices tend to boost demand for the greenback, exerting additional downward pressure on EUR/USD.
George Saravelos, global head of FX research at Deutsche Bank, assesses that energy dynamics are at the core of this weakness. He describes supply disruptions as a form of "direct tax" for European consumers who must pay foreign producers in dollars.
At the same time, inflation concerns are resurfacing. Should price pressures persist, the European Central Bank could be forced to reassess its policy stance, despite earlier expectations that rates would remain unchanged this year.
Analysts at ING said the ECB's previously perceived policy comfort zone is now being questioned. They warned that the prospect of rate hikes could unsettle carry trades and significantly widen spreads on Eurozone government bonds.
With energy shocks, inflation risks, and policy uncertainty converging, the euro is likely to remain on the defensive for the time being.