EURUSD Weakens as Higher Oil Prices Complicate Europe’s Outlook

EURUSD traded near 1.14696, up slightly on the day, but the bigger picture through March was clearly softer. The euro ended the month below 1.15 after losing more than 2% against the dollar, as investors adjusted to the growing impact of the Middle East conflict and the rise in energy prices.

The main problem for the euro was not just higher oil on its own, but what it means for Europe. The euro zone remains heavily exposed to imported energy, so a sharp rise in crude prices tends to hit the region quickly. It pushes up inflation, adds pressure to businesses and households, and makes the growth outlook more fragile at the same time.

This has also changed the way markets view the European Central Bank. Earlier, traders had been pricing in a 40% chance of a rate cut. Now, markets are leaning towards at least two rate hikes in 2026. On paper, that might sound supportive for the euro. In practice, the reaction has been more muted because these expectations are being driven by inflation risk rather than stronger economic momentum. If policy becomes tighter while growth stays weak, that is not necessarily a positive mix for the currency.

The situation around the Strait of Hormuz has added to that pressure. Even when there were signs that military tensions might cool, traders remained focused on the possibility that oil flows could stay disrupted. For Europe, that matters more than the political tone alone. If freight, insurance and crude costs remain high, the economic strain does not disappear just because headlines sound less severe.

The technical picture also remains weak. EURUSD is still trading below all of its main moving averages, which suggests the broader downtrend remains in place. The 5-day moving average at 1.1506 and the 10-day at 1.1535 are now acting as near-term resistance, while the 20-day at 1.1550 and the 30-day at 1.1620 continue to slope lower. In other words, the pair is still struggling to build any real recovery.

Explore how oil, ECB expectations and geopolitical tension are shaping the next move in EURUSD in this article.