Oil prices fell by more than 1% on Friday after the United States announced measures to manage the supply crisis, while major European countries, along with Japan and Canada, offered to join efforts to secure safe passage for shipping through the Strait of Hormuz.

Brent crude for May delivery dropped $1.58, or 1.45%, to $107.07 per barrel by 12:20 GMT. US West Texas Intermediate crude for April delivery, which expires on Friday, fell $1.30, or 1.35%, to $94.84 per barrel.

The more actively traded May WTI contract stood at $94.30, down $1.25, or 1.31%. On a weekly basis, Brent was on track to gain 3.8%, while WTI was down about 3.9% compared to last Friday’s close, with the spread between the two benchmarks widening to its highest level in 11 years on Wednesday.

The region saw fresh escalation, as Israel and Iran exchanged new attacks on Friday following a strike on an oil refinery in Kuwait.

US Energy Secretary Chris Wright said that lifting sanctions on Iranian oil shipments stranded at sea would allow supplies to reach Asia within three to four days, adding that Asia needs more oil and that the United States is participating in coordinated releases from strategic reserves in the coming months.

His remarks followed comments from US Treasury Secretary Scott Bessent, who said Washington may soon lift sanctions on Iranian oil stuck on tankers, and indicated the possibility of further drawdowns from the Strategic Petroleum Reserve.

In a joint statement, the UK, France, Germany, Italy, the Netherlands, and Japan expressed their “readiness to contribute to appropriate efforts to ensure safe transit through the strait.”

Focus turns to Hormuz

Analysts say energy prices are likely to remain elevated as long as disruptions persist in the Strait of Hormuz, through which 20% of global oil and LNG supplies pass.

Ole Hansen, Head of Commodity Strategy at Saxo Bank, said the likelihood of a rapid price decline is low, as damage to production cannot be quickly repaired, adding that the market remains undersupplied.

UBS analyst Giovanni Staunovo said price momentum will stay bullish as long as oil flows through the strait remain constrained.

IEA Executive Director Fatih Birol warned that restoring oil and gas flows from the Gulf could take up to six months, noting that both markets and policymakers are underestimating the scale of the disruption.

Supply risks could intensify further, as the Trump administration is reportedly considering plans to seize or blockade Iran’s Kharg Island to pressure Tehran into reopening the strait, according to Axios.

Brent had surged above $119 per barrel on Thursday after Iran responded to an Israeli strike on a major gas field by disrupting 17% of Qatar’s LNG export capacity—damage that could take years to repair.

Trump said he had asked Israel not to repeat attacks on Iran’s gas infrastructure, while Israeli Prime Minister Benjamin Netanyahu stated that the strike was carried out unilaterally and that Iran no longer has the capability to enrich uranium or produce ballistic missiles.

The US dollar edged slightly higher on Friday, but remained on track for a weekly loss, as rising energy prices reshaped global interest rate expectations and left the Federal Reserve as the only major central bank not expected to hike rates this year.

Before the outbreak of the US–Israel–Iran conflict in late February, investors had been pricing in two Fed rate cuts in 2026. Those expectations have since been scaled back sharply, while other central banks have turned more hawkish.

Gains for major currencies

The euro, yen, pound sterling, and Swiss franc all posted weekly gains against the dollar, as policymakers signaled readiness to raise interest rates to counter inflationary pressures driven by the energy crisis.

The euro rose about 1.4% over the week despite easing slightly to $1.1571

The yen gained 0.7% to 158.59 per dollar

Sterling advanced 1.3% to $1.3391

Analysts said the dollar is under pressure due to the unexpected hawkish shift among non-US central banks, alongside a relative improvement in energy market expectations.

Central banks turn hawkish

The European Central Bank left interest rates unchanged but warned of rising inflation due to energy, with expectations that discussions around rate hikes could begin soon, possibly leading to increases in the coming months.

The Bank of England also held rates steady but signaled readiness to act, prompting markets to price in tightening of around 80 basis points this year.

In Japan, policymakers hinted at the possibility of a near-term rate hike, supporting the yen, while the Reserve Bank of Australia raised rates for the second time in two months.

A different stance from the Fed

In contrast, the Federal Reserve kept rates unchanged, with Chair Jerome Powell stressing that it is too early to assess the economic impact of the war.

Traders have largely abandoned expectations for rate cuts this year, but have yet to price in hikes—unlike in other major economies.

Impact of war and energy

Brent crude prices have surged 50% since the start of the conflict, driven by supply disruptions and the near-total closure of the Strait of Hormuz.

Despite the dollar’s weekly decline, some analysts believe the weakness may not last, as the currency could regain strength on safe-haven demand, particularly if the conflict persists and given the US role as a major energy producer.

Overall, currency movements reflect a significant shift in global monetary policy expectations, driven by the energy crisis and escalating geopolitical tensions.

Gold prices rose in European trading on Friday, attempting to recover from a six-week low amid bargain hunting. Despite this rebound, the precious metal remains on track to post its largest weekly loss since 2020.

This sharp weekly decline— the steepest in six years—comes under pressure from a stronger US dollar and the Federal Reserve’s hawkish stance, which has significantly reduced expectations for near-term rate cuts.

Price action

Spot gold climbed 1.85% to $4,735.85, up from an opening level of $4,649.89, after hitting an intraday low of $4,634.43.

On Thursday, gold dropped 3.5%, marking its second consecutive daily loss and falling to a six-week low of $4,502.81 per ounce, amid rising global inflation concerns.

Weekly performance

So far this week, gold is down more than 6.0%, heading for a third consecutive weekly loss and its biggest weekly decline since March 2020.

US dollar

The US Dollar Index hit a 10-month high earlier this week, supported by strong demand for the greenback as a safe-haven asset amid escalating military tensions in the Middle East.

Federal Reserve

In line with expectations, the Federal Reserve kept interest rates unchanged on Wednesday for the second consecutive meeting.

The Federal Open Market Committee voted 11–1 to maintain the benchmark rate within a range of 3.50%–3.75%, the lowest level since September 2022.

The Fed’s policy statement noted that the economic impact of the war with Iran remains uncertain, but is likely to push inflation higher in the short term due to the energy price shock.

The central bank raised its inflation projections for 2026 and 2027, while keeping its rate outlook for this year broadly unchanged at around 3.50%, signaling expectations for just one rate cut later in the year.

Fed Chair Jerome Powell said short-term inflation expectations have risen in recent weeks due to developments in the Middle East.

He added that while progress on inflation is expected, it may fall short of desired levels, warning that without clear improvement, rate cuts are unlikely.

Powell also indicated that a rate hike remains a possible next move.

US rate outlook

Following the meeting, CME FedWatch data showed that the probability of holding rates unchanged in April fell from 99% to 95%, while expectations for a 25 basis point rate hike increased from 1% to 5%.

Gold outlook

Nicholas Frappell, Global Head of Markets at ABC Refinery, said gold has held some key technical support levels on the weekly timeframe and could rebound toward the $4,800 level.

He added that after gold’s notably weak performance during the Middle East conflict, market participants have been more inclined to sell rallies rather than buy dips, waiting for confirmation of their bearish bias.

SPDR Gold Trust

Holdings in SPDR Gold Trust, the world’s largest gold-backed ETF, fell by 4.86 metric tons on Thursday, marking the sixth consecutive daily decline, bringing total holdings down to 1,062.13 metric tons—the lowest level since December 17.

The euro declined in European trading on Friday against a basket of major currencies, retreating from a one-week high versus the US dollar as part of a correction and profit-taking phase, following its strongest daily gain in two months. Despite the pullback, the single currency remains on track for a weekly gain, supported by the European Central Bank’s hawkish policy stance.

The US dollar has weakened this week from its highest levels in 10 months, as rising energy prices have reshaped global interest rate expectations, with the Federal Reserve remaining the only major central bank not expected to raise rates this year.

Price action

The euro fell 0.3% against the dollar to 1.1553, down from an opening level of 1.1588, after hitting an intraday high of 1.1595.

On Thursday, the euro closed up 1.2% versus the dollar, marking its third gain in four sessions and its strongest daily performance since January 27, driven by the ECB meeting.

Weekly performance

So far this week, the euro is up 1.25% against the US dollar, on track to post its first weekly gain in three weeks.

European Central Bank

As expected, the European Central Bank kept its key interest rates unchanged on Thursday at 2.15%, the lowest level since October 2022, marking the sixth consecutive meeting without a change.

The ECB reiterated its data-dependent approach, emphasizing a meeting-by-meeting strategy without committing to a fixed rate path, while remaining ready to adjust all tools to ensure inflation returns to its 2% medium-term target.

Christine Lagarde

ECB President Christine Lagarde warned on Thursday that the military conflict is “casting a shadow” over growth and inflation prospects and will have a “material” and direct impact on prices in the near term.

She added that the external environment remains “highly challenging,” pointing to ongoing volatility in global trade policies.

European rates outlook

Sources told Reuters that the ECB is likely to begin discussing rate hikes as early as next month.

Following the meeting, money markets increased pricing for a 25 basis point rate hike in April from 1% to 25%.

Investors are now awaiting further economic data from the eurozone, particularly on inflation, employment, and wages, to reassess these expectations.

US dollar

The US Dollar Index rose 0.3% on Friday, rebounding from a one-week low as selling pressure on the currency eased.

The dollar had come under broad pressure on Thursday following policy meetings by central banks in Japan, Switzerland, the UK, and the eurozone, where policymakers signaled a potential shift toward tighter monetary policy in response to the Middle East conflict and its impact on energy supplies.

Analysis

Analysts at JPMorgan noted that while the Federal Reserve appears willing to remain patient in the face of a shock that presents dual risks to its mandate, the ECB seems unusually sensitive.

They added that there is a clear bias toward rate hikes this year, even if the timing and pace remain uncertain.