USD Weakens as Oil Drops on US-Iran Optimism Despite Hormuz Closure

The US dollar is facing downward pressure as risk appetite surges across global markets, driven by optimism surrounding potential US-Iran diplomatic developments. WTI crude oil has retreated significantly to $91.75, while the front-month June contract trades near $88.15, despite the Strait of Hormuz entering its eighth consecutive week of de facto closure. The disconnect between geopolitical reality and market pricing is notable, as no concrete progress has been reported on the Middle East conflict. The sharp decline in oil prices is reducing safe-haven demand for the dollar and easing inflationary concerns that had supported USD strength in recent weeks. Commodity-linked currencies such as CAD may face headwinds from lower crude prices, while risk-sensitive pairs benefit from the broader optimism. Traders should exercise caution given the fragile nature of the rally, as any deterioration in US-Iran talks or escalation near the Strait of Hormuz could trigger a sharp reversal in sentiment. Key levels to watch include oil's psychological support near $90 for WTI and broader USD index support zones.