technical

AUD/USD weakens further alongside the rest of its risk-linked peers, breaching below the 0.7000 support and exposing extra weakness in the short-term horizon.

Oil’s market reaction has been immediate and sharp. The market is no longer pricing in a simple rise in tensions, but the de facto paralysis of the world’s most strategic energy corridor: the Strait of Hormuz.

Even without a confirmed, sustained disruption, the mere risk to a key global energy chokepoint is enough to inject a significant premium into European Gas markets. And for the Euro, that matters.

The EUR/USD pair pierced the 1.1600 mark on Tuesday, as risk aversion keeps fueling demand for the US Dollar (USD). The escalation of the Middle East crisis has finally interrupted traffic through the Strait of Hormuz, with the immediate consequence of soaring Oil prices.

A dramatic escalation of geopolitical tensions in the Middle East puts bond investors in a dilemma. In normal circumstances, investors would rush into US Treasuries, pushing prices higher and yields lower, in a classic flight to safety. Not this time.

EUR/USD extends its slide after closing deep in negative territory on Monday and closes in on 1.1600. The risk-averse market atmosphere could make it difficult for the pair to stage a rebound, despite technically oversold conditions.