Oil Surge Lifts USD as Iran War Escalation Weighs on Risk Sentiment

Crude oil prices surged sharply as Middle East war concerns intensified, with Secretary of State Rubio indicating the US-Iran conflict could extend another 2-4 weeks. The USD broadly strengthened on safe-haven flows, though rising oil prices simultaneously stoked inflation fears. Iran is expected to deliver a counter-proposal to the US, while Houthis in Yemen announced entry into the conflict in support of Iran, further threatening supply routes. On the data front, the University of Michigan final March consumer sentiment reading came in at 57.3, below the 54.0 consensus, reflecting deteriorating consumer confidence amid geopolitical uncertainty. ECB board member Schnabel signaled patience on rate adjustments, stating there is no need to rush into action, offering limited EUR support. Philadelphia Fed commentary added to a cautious policy tone. Near-term, traders should monitor oil price trajectories and Strait of Hormuz disruption risks as primary drivers. Elevated energy costs and weakening sentiment data create a stagflationary backdrop that could sustain volatility across major pairs in the sessions ahead.