• EUR/USD rebounds as easing geopolitical tensions weaken safe-haven demand for the US Dollar.
• Trump pauses planned strikes on Iran’s energy infrastructure, citing “constructive” talks, boosting risk sentiment.
• Ongoing uncertainty around the Strait of Hormuz continues to underpin inflation concerns despite the temporary de-escalation.

EUR/USD rebounds on Monday, erasing earlier losses as the Euro (EUR) gains traction amid broad US Dollar weakness after President Donald Trump delayed planned strikes on Iran, reducing safe-haven demand for the Greenback.

At the time of writing, EUR/USD is trading around 1.1623, recovering from an intraday low near 1.1584. Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades near 99 after retreating from an intraday high of 100.15.

In a post on Truth Social, Trump said he had instructed the US Department of War to “postpone any and all military strikes against Iranian power plants and energy infrastructure for a five-day period,” citing the “constructive” nature of ongoing discussions. He added that the decision remains conditional on progress in talks expected to continue through the week.

Later, Trump told Fox Business that Iran “wants to make a deal badly,” adding that an agreement could be reached within five days or sooner.

Speaking to reporters in Palm Beach, Florida, Trump said, “If they carry through, we will end the conflict.” He added that the US and Iran have reached around “15 points of agreement so far,” including that “Iran won’t have a nuclear weapon.”

However, Iran pushed back against Trump’s claims. Iran’s Fars News Agency, citing sources, said there were no direct communications with the US, nor through intermediaries. Meanwhile, Iran’s Foreign Ministry, cited by Mehr News Agency, said Trump’s remarks were aimed at lowering energy prices and buying time for military plans.

The mixed signals from both sides continue to keep markets on edge. However, the immediate de-escalation tone has lifted overall market sentiment, reducing safe-haven demand for the US Dollar while pushing Crude Oil prices sharply lower.

West Texas Intermediate (WTI) is trading around $86.15 at the time of writing, down nearly 11%, though it remains elevated compared to pre-conflict levels.

That said, unless there is a clear de-escalation and a reopening of the Strait of Hormuz, uncertainty is likely to persist, keeping Oil-driven inflation risks elevated. Markets have responded by pricing in the possibility of rate hikes by the European Central Bank (ECB) this year, while fully pricing out Federal Reserve (Fed) rate cuts for 2026.

Elsewhere, the Financial Times reported that the EU could lose favourable access to US liquefied natural gas (LNG) if it changes its trade deal with the United States. US Ambassador to the EU Andrew Puzder said the energy part of the agreement could be at risk if the bloc modifies other terms.

The European Parliament is set to vote on the pact on Thursday, which includes a commitment for the EU to purchase $750 billion worth of US energy by 2028, including LNG, oil and civil nuclear technologies.