Brown Brothers Harriman’s (BBH) Elias Haddad observes that the US Dollar is trading defensively against most major currencies, despite Brent crude oil prices holding above $100 a barrel and European natural gas prices remaining near recent highs [1]. The bank highlights ongoing security concerns in the Strait of Hormuz, where Iranian drones and missiles continue to target energy infrastructure around the Persian Gulf [1]. Shipping security news through the Strait is described as mixed, with several countries—including China, Pakistan, India, Turkiye, France, and Italy—reportedly securing side deals with Iran to ensure their ships can transit safely, which has helped stabilize perceived shipping risks [1].
However, the head of the International Maritime Organization cautioned that naval escorts cannot fully guarantee the safety of vessels, given the Strait's narrow 2-mile wide navigable channels and its proximity to Iran's mountainous coastline, which leaves ships exposed to potential attacks [1]. Financial markets are currently debating whether the situation is approaching 'peak fear' or if further escalation in shipping security concerns is possible. BBH leans toward the former, suggesting that the worst may be over, but notes their conviction is low due to US actions being more reactive than strategic [1].
Market data shows the DXY index remains below 100.00, Brent crude stays above $100 a barrel, and both stock and bond markets are finding stability after recent volatility [1]. BBH concludes that near-term USD risks remain skewed to the upside, reflecting ongoing uncertainty around the Strait of Hormuz and energy infrastructure security [1].
CONCLUSION
Security concerns in the Strait of Hormuz continue to influence USD risk and energy prices, with mixed signals on shipping safety stabilizing market fears. BBH sees near-term USD risks as skewed to the upside, while stock and bond markets remain stable. The situation remains fluid, with low conviction on whether peak fear has been reached.