Iran Condemns US Hormuz Strikes, Forex Risk Resets

Iran’s Foreign Ministry issued a formal condemnation of US strikes near the Strait of Hormuz, injecting a geopolitical shock into currency markets. The condemnation follows US military action in the vicinity of the strait, a chokepoint that handles roughly one-fifth of global oil consumption. Forex traders repriced the event quickly, with safe-haven currencies gaining as exposure to oil-linked and emerging-market FX was reduced.

Hormuz Condemnation and Currency Risk Channels

The Strait of Hormuz sees about 20 million barrels of oil transit daily. Military action near the waterway adds a direct supply risk to crude prices. Higher oil prices alter currency pairs through terms-of-trade mechanics. Net oil importers such as Japan and the Eurozone face downward pressure on their currencies relative to net exporters like Canada and Norway. In the initial risk-off phase, however, the US dollar and Japanese yen tend to strengthen first as traders unwind carry trades and seek liquidity. The Swiss franc also typically attracts bids during such episodes.

The immediate reaction in USD/JPY was a decline, reflecting yen demand. USD/CAD faced opposing forces. Oil’s potential rise supports the Canadian dollar. Broad risk aversion favors the US dollar. NOK, tied to Norwegian oil exports, may gain relative to euro as Brent crude spikes. Emerging-market currencies, especially those reliant on energy imports, are most vulnerable.

Affected Pairs and Positioning

Traders should monitor oil price action as the primary mechanism linking this geopolitical event to forex. A sustained move above $90 per barrel keeps the risk premium embedded in the crosses. If crude retreats on de-escalation signals, safe-haven flows reverse quickly. The yen remains the clearest beneficiary because Japan imports nearly all its oil and the Bank of Japan’s low-yield policy makes USD/JPY sensitive to risk shocks. The euro weakness is less direct but follows from the Eurozone’s net energy dependency. Commodity currencies such as AUD, NZD, and CAD show split reactions. Exporters gain from oil terms; they lose from risk-off positioning.

Positioning data before the strikes showed speculative shorts in JPY on the view that the BOJ would hold policy steady. That positioning leaves room for a squeeze if safe-haven flows intensify. The CFTC’s weekly COT report will be the first concrete read on whether traders have started reversing these bets.

Next Catalyst for Forex Flows

The next catalyst is any Iranian military response or additional US strikes. A reciprocal attack on shipping or infrastructure in the region would push oil toward the $95 level, reinforcing yen bids and pressuring emerging-market currencies. In contrast, if the White House frames the action as limited and Iran signals restraint, the risk premium decays within a session. Traders can track the Strait of Hormuz headlines alongside the US Treasury’s daily oil market briefing. The event also overlaps with existing JPY strength from the UK bond underperformance story, as described in BNY’s analysis. For practical execution, use a forex pip calculator to size trades around these volatile cross rates.

Until the next official statement from either government, the market will operate on headline risk. This means tight stops and smaller position sizes for intraday forex strategies. The risk-reward on short USD/JPY or long USD/CHF remains asymmetric until the geopolitical fog clears.