The war in the Gulf and the restriction of energy supply have yet to show obvious signs of an economic crisis developing in the Eurozone. There is no data on industrial production for March, and the reports published last week for February were overall positive and differed little from forecasts. Business activity indices in March remained above 50 points, which indicates expansion, and preliminary data on consumer prices also do not show growth yet. In particular, inflation in Germany in March remained at February levels.

The increase in energy prices in the Eurozone averaged 6.8% month-on-month in March, significantly lower than the 12.2% increase in March 2022. In the services sector, price growth remains within the European Central Bank's scenario. Thus, it cannot yet be asserted that inflation will increase rapidly, and the main threat at the moment lies in physical supply disruptions.

Europe has left Trump in good company with Israel, demonstratively ignoring his calls to join the war, and is waiting for a resolution. This, of course, is not a strategy; European politicians likely hope that supplies will resume and the crisis will not be prolonged. If uncertainty diminishes, Europe will be able to return to its economic recovery trend, while signs of an approaching recession are increasing in the US.

The fruitless negotiations and Trump's threats to blockade the Strait of Hormuz heighten the risk of an escalation of conflict, which was not anticipated following the ceasefire declaration, and markets are unsure how to react. Movements on Monday morning were somewhat restrained; the dollar strengthened, oil prices rose, but remained notably below their March peaks.

A clean short position has been formed for the euro, with a weekly change of -1.2 billion, while short-term factors, primarily market expectations for the swift conclusion of the war, dominate, leading to a reversal in the calculated price.

The euro continues to balance in uncertainty as the long-term consequences of the situation in the Persian Gulf could vary widely. Should supply restrictions persist, Europe will soon face energy shortages, further pressuring the industrial sector. A ramp-up in energy supply from the US will put the euro in a dependent position, as industrial costs will rise, leading to a correction in the EUR/USD exchange rate toward lower levels. Conversely, the opening of the strait could lead to a sharp increase in EUR/USD, with the intrigue resting on whose terms further traffic will occur—those of the US or Iran. There is no clarity on this issue.

In the short term, the euro may anticipate corrective growth, limited by the 1.1820/40 resistance zone. However, if the US resumes active military operations, movement toward support at 1.1350/90 is more likely.