A surge in geopolitical tensions between the US and Iran has triggered renewed risk aversion in global markets, supporting the US Dollar (USD) against several major currencies and impacting commodities like gold. According to multiple reports, US forces intercepted and shot down two Iranian one-way attack drones near the Strait of Hormuz after they attempted to target commercial vessels, while Iranian state media described explosions in Sirik as a confrontation with a vessel breaching the waterway and claimed the Islamic Revolutionary Guard Corps (IRGC) issued a warning to an oil tanker, enforcing a regional traffic ban [1][2][4].
US President Donald Trump stated that a comprehensive peace agreement with Iran could be finalized as early as this weekend, following his recent decision to pause planned military strikes on Iran’s energy infrastructure. While Trump expressed optimism, Iranian sources, including the Foreign Ministry and Fars news agency, countered that no final decision had been reached and that key issues such as Hormuz access and frozen funds remain unresolved. Reports also indicate that Iran's new Supreme Leader, Mojtaba Khamenei, has not agreed to the proposed US peace deal [1][2][4].
The uncertainty surrounding the Iran deal has fueled demand for the safe-haven US Dollar. The USD/IDR pair extended its gains for the third consecutive day, trading around 17,950, as the Indonesian Rupiah (IDR) weakened despite Bank Indonesia’s rare off-cycle 25 basis point rate hike to 5.50% aimed at stabilizing the currency. However, Bank Indonesia reported a positive response from foreign investors, with a notable increase in capital inflows and a successful bond auction raising 15 trillion Rupiah ($834.49 million), which could help limit further downside for the IDR [1]. Similarly, the USD/CHF pair rebounded, trading around 0.7960, as risk aversion lifted the Greenback against the Swiss Franc [4].
Gold (XAU/USD) faced selling pressure, stalling near $4,246-$4,247, as the combination of Iran deal uncertainty and hawkish US Federal Reserve expectations weighed on the non-yielding metal. Recent US inflation data, including the Consumer Price Index (CPI) and Producer Price Index (PPI), pointed to re-accelerating inflation, reinforcing expectations for higher-for-longer US interest rates and further supporting the USD. Gold remains on track for heavy losses for the second consecutive week, with technical indicators suggesting persistent downside pressure [2].
In the Eurozone, the EUR/USD pair traded marginally lower at around 1.1567, as the USD rebounded after Thursday’s decline. The European Central Bank (ECB) raised its key interest rates by 25 basis points to 2.25% in response to inflation pressures linked to Middle East conflicts. Analysts at Deutsche Bank expect another ECB rate hike in September. Technical analysis indicates a bearish near-term bias for EUR/USD, with downside pressure persisting [3].
Additionally, Geneva is preparing for a major anti-G7 demonstration expected to draw 50,000 protesters, prompting the deployment of 4,000 soldiers and the closure of 27 Swiss-French border crossings, resulting in a security bill of approximately 20 million Swiss Francs (CHF) [4].
CONCLUSION
Geopolitical tensions in the Middle East and uncertainty over a US-Iran peace deal have driven safe-haven flows into the US Dollar, pressuring emerging market and European currencies while weighing on gold. Central bank actions and ongoing diplomatic developments remain key factors for market direction in the near term. Investors are likely to remain cautious until greater clarity emerges regarding the Iran deal and regional stability.