In an Easter Sunday social media post, Trump threatened to target Iran’s power plants and bridges on Tuesday if the strategic waterway is not reopened, setting a specific deadline of Tuesday Eastern Time (0000 GMT).
With most of Asia and Europe closed for a holiday on Monday, liquidity is likely to be thin, although risk-off sentiment has broadly set in earlier in the week.
“Trump’s latest ultimatum is bearish not only because investors feel war is guaranteed tomorrow if Iran doesn’t open the Straits, but also because each new ultimatum makes the disruption longer, stickier and more macro-negative,” said Charu Chanana, chief investment strategist at Saxo in Singapore.
“Investors see this as an oil-to-inflation rate problem, which is why the dollar is the cleanest safe haven right now, while gold, bonds and the yen all look much less reliable than usual geopolitical fears.”
The euro fell 0.13% to $1.151 in early trading, while sterling last traded at $1.3187. The dollar index, which measures the US currency against six peers, was at 100.2.
The Australian dollar was 0.13% higher at $0.6893, hitting a monthly low last week.
Global markets have been jittery since the US-Israeli war with Iran broke out in late February.
That has pushed oil prices above $100 a barrel, raising fears of higher inflation and rate hikes around the world. Concerns about an impact on economic growth have also gained weight as the risks of stagflation increase.
Traders are now not pricing in a move from the Federal Reserve in the second half of 2027, compared to expectations of two rate cuts in 2026 earlier in the year.
Last week’s data suggested that the US Labor market conditions remained calm in March, although economists warned that a protracted war in the Middle East posed downside risks.
ING economist James Knightley said that despite the better-than-expected payrolls report, only 260,000 more people were in work today than 12 months ago, suggesting the job market has effectively stalled during a period when the US growth story was healthy.
“Our concern is that as the Middle East conflict shows little sign of an imminent conclusion, an overlay of heightened geopolitical, economic and market unrest will no longer encourage businesses to suddenly start hiring,” Knightley said.
Yen vigil
The Japanese yen weakened to 159.77 per US dollar, not far from a 21-month low hit last week, as traders watched for signs of intervention by Tokyo following strong warnings from officials over the past few days.
Japanese Finance Minister Satsuki Katayama put currency traders on notice on Friday, saying the government was ready to crack down on speculative moves in foreign exchange markets as volatility rose “significantly”.
Still, many doubt the firepower of any intervention at a time when geopolitical turmoil in the Middle East is fueling unrelenting demand for safe-haven dollars. The yen is down 1.5% since the war began, stalling near the 160 level.
Speculators are also adding to their short yen positioning, with the latest weekly data showing a short position of $5.7 billion, the highest since July 2024, when Japan last intervened in FX markets.
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