Even Brent can’t heal the dollar now

Even Brent can’t heal the dollar now

• Brent’s attempts to break above $110 a barrel are not preventing the greenback from falling.
• The US dollar is reacting more to corporate earnings than to geopolitics.

The US dollar is retreating for the fourth day running, despite Brent’s attempts to hold onto the key $110-per-barrel level. The last time Brent crude was seen at these levels was in May, when significant disruptions to supplies through the Strait of Hormuz prompted the conclusion of a fragile and short-lived peace agreement between Washington and Tehran. This time, according to estimates by the US Department of Energy, export volumes from the Middle East stand at 80% of pre-war levels. Nevertheless, a substantial geopolitical risk premium is preventing oil prices from falling.

According to Kpler, 18 ships have been attacked in the Strait of Hormuz over the past two weeks. Coupled with the Houthis’ ongoing attacks on Saudi Arabia, this is keeping tensions high in the Middle East. With its back against the wall, Iran has no choice but to assert its control over the world’s key oil artery.

The fall in Brent prices is being held back by an increase in tanker traffic bound for China and a significant reduction in global stocks. At the start of the conflict in the Middle East, these stocks served as a buffer, holding back the rally in North Sea crude. The IEA has now announced the release of the final 100 million barrels from strategic reserves, forming part of the 400-million-barrel batch agreed in March. Beijing’s growing appetite for oil is giving the bulls confidence.

The divergence between Brent and the US dollar is driven by a shift in market narratives. In the recent past, the greenback strengthened against the backdrop of an oil rally, serving as both the currency of an energy-exporting nation and a safe-haven asset. Currently, the USD index is showing greater sensitivity to developments in the US equity market.

The Nasdaq-100’s worst weekly performance since April 2025 triggered a plunge in Treasury bond yields amid strong demand for safe-haven assets. The US dollar has lost its main trump card, especially as the likelihood of the Fed tightening monetary policy in October has diminished. However, once technology shares recovered, the fall in the USD index slowed. As a result, the forex market is paying more attention to corporate earnings reports than to news from the Middle East.

The FxPro Analyst Team