The US Dollar refused to break lower despite what should have been overwhelmingly dollar-negative news, as Washington and Tehran finalized a draft ceasefire framework that reopens the Strait of Hormuz and lifts restrictions on Iranian oil exports, leaving EUR/USD stalled below 1.1660.
The US Dollar refused to break lower despite what should have been overwhelmingly dollar-negative news, as Washington and Tehran finalized a draft ceasefire framework that reopens the Strait of Hormuz and lifts restrictions on Iranian oil exports, leaving EUR/USD stalled below 1.1660.
Negotiators from Washington and Tehran finalized a draft memorandum of understanding Thursday that would extend the current ceasefire by 60 days, reopen the Strait of Hormuz — through which roughly a fifth of the world's oil supply flows — and permit Iran to sell crude freely during the truce period. The deal now awaits President Donald Trump's signature, with the White House confirming the existence of the framework while stressing it has not yet been approved.
"The market is pricing in the deal but also hedging against its collapse, which is why the dollar isn't selling off the way a pure risk-on scenario would dictate," said Elena Fischer, geopolitical risk analyst at Edgen. "Traders remember the last time a ceasefire was announced — it took weeks to implement, and the strait never fully reopened."
The euro's failure to breach 1.1660 reflects a broader pattern of dollar resilience that has confounded expectations. Since the conflict began in late February, Brent crude surged from $60 a barrel to peaks above $120 during escalations, while shipping flows through the Strait of Hormuz plunged 90 percent from pre-war volumes. A swift resolution would remove one of the largest geopolitical risk premiums embedded in energy markets, yet the dollar has held its ground.
Why the Dollar Isn't Breaking
The dollar's refusal to weaken despite a de-escalation in the Middle East points to deeper macro forces at play. The Federal Reserve's rate path remains the dominant driver of dollar direction, and markets are still pricing uncertainty around the next move. The 60-day ceasefire window also coincides with a looming War Powers Resolution deadline, creating a binary outcome that keeps options volatility elevated.
Oil markets face their own inflection point. Brent crude has already pulled back from war-time highs, but GasBuddy analyst Patrick De Haan warned that prices "could spike next week" if the deal collapses. Iranian crude returning to global markets would add supply at a time when the Biden-era Strategic Petroleum Reserve drawdowns have left the US with limited emergency buffer — the reserve stood at roughly 370 million barrels as of early 2026, down from 638 million in early 2023.
The last time a major Middle East ceasefire was announced — the 2020 US-Taliban agreement — oil prices initially fell 6 percent before reversing gains within two weeks as implementation faltered. Markets are pricing a similar pattern of skepticism this time, with the dollar's resilience reflecting a wait-and-see posture rather than conviction.
What Happens Next
The next 72 hours are critical. Trump's approval remains the final gate, and Iranian state media has already pushed back against the president's characterization of the deal as "largely negotiated," calling it "incomplete and inconsistent with reality." Tehran has maintained that the Strait of Hormuz will remain under its exclusive control, a position that directly contradicts the draft framework's provisions on unrestricted shipping.
For EUR/USD, a break above 1.1660 would require either a confirmed deal with verifiable implementation milestones or a shift in the Fed-ECB rate differential. The European Central Bank's next policy decision on June 12 will provide the next catalyst, with markets currently pricing 25 basis points of easing. If the ceasefire holds and oil prices stabilize, the dollar's safe-haven premium could erode gradually — but the market is not betting on a sudden collapse.
This article is for informational purposes only and does not constitute investment advice.
