Finance
Yen, euro under pressure as middle east conflict stokes energy concerns
Published by Global Banking & Finance Review®
Posted on March 3, 2026
3 min readLast updated: March 3, 2026
Quick Summary
The yen and euro fell as Middle East conflict spurred energy fears. Safe-haven demand lifted the dollar, while central banks—including Japan’s with potential intervention and the BoJ’s Ueda speech—are under scrutiny amid soaring LNG prices and supply risks.
Yen and Euro Weaken as Middle East Conflict Fuels Energy Market Turmoil
Currency Markets React to Geopolitical Tensions and Energy Uncertainty
By Rocky Swift
Impact of Middle East Conflict on Major Currencies
TOKYO, March 3 (Reuters) - The yen and euro were broadly lower on Tuesday as the widening Middle East conflict focused attention on countries dependent on energy imports and how central banks may respond to inflation pressures.
The dollar benefited from safe-haven demand as the U.S. and Israeli air war against Iran spilled out into neighboring countries. The euro steadied after sliding more than 1% as doubts swirled about when oil shipments from the region will be restored.
Japanese and European Policy Responses
Japanese Finance Minister Satsuki Katayama suggested that currency market intervention remains an option to defend the yen, and a speech by Bank of Japan Kazuo Ueda later in the day will be closely watched for signals on future rate hikes.
"Europe and Japan stand out within the major economies, in that they still have a great need to import energy," Rodrigo Catril, a currency strategist at National Australia Bank, said on a podcast. "History will tell you that currencies such as the yen and the euro would struggle to perform."
Recent Currency Movements and Market Data
The dollar index, which measures the greenback against a basket of currencies, traded at 98.49 after a 0.9% surge in the previous session. The euro edged up 0.07% to $1.1695.
The yen tacked on 0.09% to 157.2 per dollar after a 0.8% tumble in Monday's session. Sterling was little changed at $1.3407.
Japan's Katayama said on Tuesday that authorities have been in close contact with overseas financial officials and are closely monitoring financial markets with an "extremely strong sense of urgency."
Energy Supply Disruptions and Global Impact
Israel attacked Lebanon in response to strikes by Hezbollah, and Tehran kept up its missile and drone attacks on Gulf states. Qatar halted its production of liquefied natural gas on Monday, prompting precautionary shutdowns of oil and gas facilities across the Middle East.
Europe and Japan are more exposed to higher energy costs than the U.S., which is a net energy exporter.
Inflation and Central Bank Rate Expectations
Concerns that higher inflation will delay the Federal Reserve's next cut in interest rates also boosted the dollar.
A rate cut is no longer fully priced in until September, compared to previous expectations of July, based on pricing in the Fed funds futures market. Traders continue to price in two 25-basis-point cuts by year-end.
Other Market Reactions
The Swiss National Bank said it was more willing to intervene in foreign currency markets after the conflict in the Middle East pushed the Swiss franc to its highest level against the euro in more than a decade.
The Australian dollar strengthened 0.21% to $0.7106. The kiwi added 0.1% to $0.5946.
In cryptocurrencies, bitcoin fell 0.78% to $68,889.68 and ether declined 0.6% to $2,031.20.
(Reporting by Rocky Swift)
Key Takeaways
- •Middle East conflict disrupted LNG supply—Qatar’s Ras Laffan plant shutdown sent European gas prices soaring over 50%, raising global energy risk. (hindustantimes.com)
- •Investors sought safety in the dollar, weakening energy-dependent euro and yen; central banks are closely watched for policy reactions, including possible yen intervention. (ft.com)
- •Japan signed a 27‑year LNG deal with QatarEnergy for emergency and long‑term supply, underlining Asia’s push for energy resilience amid market turbulence. (argusmedia.com)
References
Frequently Asked Questions about Yen, euro under pressure as Middle East conflict stokes energy concerns
1Why are the yen and euro under pressure?
The yen and euro are under pressure due to concerns over energy import dependency in Japan and Europe as the Middle East conflict disrupts oil and gas supplies.
2How has the Middle East conflict affected global currencies?
The conflict has increased safe-haven demand for the dollar and caused volatility in currencies exposed to energy imports like the yen and euro.
3What measures are Japanese authorities considering to support the yen?
Japanese authorities suggested that currency market intervention remains an option to defend the yen if necessary.
4How might the conflict impact central bank decisions regarding interest rates?
Rising energy costs and inflation pressures may delay interest rate cuts by central banks, as seen with the Federal Reserve.
5Which currencies and assets saw notable movement amid the crisis?
The dollar strengthened, the yen and euro weakened, the Swiss franc reached a decade high against the euro, and cryptocurrencies like bitcoin fell.
