EUR/USD forecast undermined as crude holds ground despite strategic oil reserves release

• EUR/USD forecast remains undermined as geopolitical tensions lift oil prices and the dollar
• Energy risk: Iran warns it is switching from “reciprocal hits” to “continuous strikes” as IEA emergency oil reserve release not having the desired impact
• EUR/USD technical analysis points to sub $1.15

 

As has been the case in the last several days, nothing else but crude oil matters right now. And the with the EIA’s record oil reserves release unable to push prices lower today, this is keeping risk appetite downbeat, with stock markets struggling and currencies of oil importing regions lower. The latest US inflation data barely caused any movements in FX. Against a backdrop of still elevated oil prices, and the potential for prices to push even higher, we maintain a cautiously negative EUR/USD forecast.

 

 

More on oil prices later but first let’s discuss the EUR/USD as it looks poised for a potential breakdown.

 

EUR/USD forecast: Dollar continues to remain supported on geopolitical tensions

 

The EUR/USD is driven by both a weakening euro due to the rising oil prices, but also a strengthening US dollar.  The greenback is continuing to find support again as geopolitical tensions in the Middle East push oil prices higher and inject fresh uncertainty into global markets, while hurting currencies of oil-importing economic regions. With Brent crude climbing back towards $90 a barrel, investors appear to be leaning toward the greenback as a defensive play, even as the latest inflation data suggests price pressures were fairly calm heading into February. On an annual basis, headline inflation held at 2.4%, matching forecasts and unchanged from January. Inflation looked reasonably well behaved before the latest surge in oil prices. That’s the key caveat. Energy costs have a habit of feeding through into inflation expectations, and if crude continues climbing towards $100 a barrel, the market may start pricing in the risk of the Fed tightening, not loosening further.

 

 

Against this backdrop, the EUR/USD forecast leans bearish, and we could see the pair break below the key 1.1578 level – the low from January – on a daily closing basis. While we have seen the EUR/USD go below this level multiple times in recent days, it hasn’t been able to hold below it on a closing basis. If it finally cracks then 1.1500 could be the immediate target from here, with the August 2025 low of 1.1391 being the next obvious downside target. Resistance is now seen around 1.1606m 1.1637 and 1.1670.

 

Crude oil barely reacts as EIA tap oil reserves - here's why

 

So, the IEA has confirmed that member states will release 400 million barrels from emergency reserves to help stabilise oil prices. How much of the disruption to global oil supplies from the Iran conflict that 400 million will actually make up for remains to be seen. It is difficult to say how much has been lost now that we are in day 12 of the conflict, with oil analysts unsure whether this release amount is enough. But judging by the reaction of oil prices, it looks like the market had discounted the release of 400 million barrels from reserves already. Prices have barely flinched. It looks like investors are not convinced this will have the desired effect and are probably expecting the flow of oil through the Strait of Hormuz to remain effectively closed for a long time, now with Iran suggesting it is switching from “reciprocal hits” to “continuous strikes.”

 

Middle East tensions push oil back toward $90

 

 

Crude oil prices have also moved higher after fresh warnings from Iran about the potential disruption of oil flows. According to reports, Tehran says it is shifting its military strategy from “reciprocal hits” to “continuous strikes,” a move that suggests the conflict could intensify rather than cool.

 

Iranian officials also issued stark warnings about global oil supply. One military spokesperson reportedly said the United States would not be able to control oil prices, while also claiming Iran would not allow “even one litre of oil” to reach the US, Israel or their partners.

 

More notably, Iran suggested that any vessel or tanker heading toward those destinations could become a legitimate target, raising concerns about shipping routes and broader supply disruptions.

 

 

 

 

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R