The Japanese yen declined in the Asian market on Monday against a basket of major and minor currencies, retreating from a four-week high against the U.S. dollar due to active correction and profit-taking, alongside renewed buying of the American currency as a preferred alternative investment.

This comes amid escalating tensions between the United States and Iran over control of the Strait of Hormuz, and Tehran's continued refusal so far to participate in a new round of negotiations scheduled to be held in Pakistan later today.

Despite the current rise in global oil prices, the probability of the Bank of Japan (BoJ) raising interest rates during the April meeting remains low, especially after Governor Kazuo Ueda refrained from pledging to normalize monetary policy in the near term due to the impact of the Iranian war on economic forecasts.

Price Overview

- Japanese Yen Exchange Rate Today: The dollar rose against the yen by approximately 0.4% to (¥159.20), from Friday's closing price of (¥158.59), and recorded a low during today's trading of (¥158.74).

- The yen ended Friday's trading up by 0.35% against the dollar, marking its first gain in three days and hitting a four-week high of 157.59 yen after Iran's announcement to open the Strait of Hormuz to global navigation.

- Last week, the Japanese yen achieved a gain of approximately 0.45% against the U.S. dollar, marking its third consecutive weekly gain thanks to the Iranian war truce.

The U.S. Dollar

The dollar index rose on Monday by 0.15%, extending its gains for the third consecutive session and reaching its highest level in nearly a week, reflecting the continued ascent of the American currency against a basket of global currencies.

This rise comes amid renewed buying of the U.S. dollar as a top alternative investment, given the escalating tensions between the United States and Iran and the diminishing chances of reaching a peace agreement in the Middle East.

Iranian War Updates

- The Iranian Navy announced the re-closing of the Strait of Hormuz as of Saturday afternoon until the U.S. blockade imposed on Iranian ships is lifted.

- U.S. President Donald Trump stated that the U.S. Navy intercepted the Iranian-flagged cargo ship "Tosca" in the Gulf of Oman.

- Tehran considered the attack on the ship an "act of maritime piracy" and a flagrant violation of the ceasefire agreement, vowing to respond to this escalation.

- While the Pakistani capital, Islamabad, prepares to host a second round of peace negotiations later today, Iran refuses to participate in this round so far.

- Several international and regional parties are pressuring Tehran to participate in the peace negotiations before the two-week ceasefire agreement expires tomorrow, Tuesday.

Global Oil Prices

Global oil prices rose on Monday by more than 5% as part of a strong recovery from a four-week low, amid renewed fears of supply disruptions from the Arabian Gulf region, especially after the re-closing of the Strait of Hormuz to oil tankers.

Undoubtedly, the rise in global oil prices renews fears of accelerating inflation, which may prompt global central banks to raise interest rates in the near term—a sharp shift from pre-war expectations of cutting or holding rates steady for a long period.

Japanese Interest Rates

- BoJ Governor Kazuo Ueda refrained from pledging to raise interest rates in April, given the war's impact on economic forecasts.

- The pricing of the probability of the Bank of Japan raising interest rates by a quarter-percentage point at the April meeting is currently stable around 10%.

- To re-price those probabilities, investors await the release of more data on levels of inflation, unemployment, and wages in Japan.

Oil prices fell sharply on Friday after Iranian Foreign Minister Abbas Araghchi announced that the Strait of Hormuz is now "fully open" during the ceasefire period between Israel and Lebanon, bolstering market hopes that major supply disruptions are receding.

Araghchi's statements on the "X" platform followed remarks by U.S. President Donald Trump late Thursday, in which he stated that the war with Iran, which began on February 28, "must be coming to an end very soon."

U.S. West Texas Intermediate (WTI) crude futures for May delivery plunged by about 12% to close at $83.85 per barrel. Global benchmark Brent crude for June delivery dropped 9% to reach $90.38 per barrel at the close.

In his post, Araghchi noted that vessels transiting the vital waterway must follow a "coordinated route" determined by Iranian maritime authorities.

Trump responded with a post on "Truth Social" thanking Iran for opening the Strait, but stated in a second post that the U.S. naval blockade on Iranian ports will remain "fully in effect" until an agreement is reached with Tehran.

Israel and Lebanon agreed on Thursday to a 10-day ceasefire that began at 5:00 PM ET. Israel's military campaign in Lebanon against the Iranian-backed group Hezbollah had previously hindered U.S. negotiations with Tehran.

In another "Truth Social" post, Trump stated that Israeli Prime Minister Benjamin Netanyahu and Lebanese President Michel Aoun would be invited to the White House for what he described as the first significant talks between the two countries since 1983.

The U.S. State Department added that the parties aim to create conditions for lasting peace, including mutual recognition of sovereignty, alongside enhancing border security and reaffirming Israel's right to defend itself.

It also noted shared concerns regarding non-state armed groups threatening Lebanese sovereignty, while Trump said he expects Lebanon to "deal with Hezbollah." These developments have bolstered hopes for a broader settlement of the Middle East conflict.

ING stated that oil prices began declining amid expectations that the U.S.-Iran ceasefire would be extended for an additional two weeks, with the potential resumption of talks to end the conflict.

However, the firm's analysts warned that the physical market is tightening with every day that oil flows through the Strait of Hormuz do not resume.

They added that even with some supplies rerouted via pipelines and limited tanker movements, the firm estimates that approximately 13 million barrels per day of supplies have been disrupted—a figure that could rise further if the U.S. blockade continues.

The analysts pointed out that "the greatest upside risk in the market is the failure of peace talks between the U.S. and Iran, a scenario that is not ruled out given the wide gap between the demands of both parties."

When a geopolitical shock hits energy markets, a recurring pattern emerges: diesel prices surge rapidly, while gasoline lags behind.

According to data from the U.S. Energy Information Administration (EIA), from the beginning of the conflict in Iran until April 6, 2026, the average price of gasoline in the United States increased by $1.11 per gallon, while diesel prices jumped by $1.75 per gallon.

This disparity is particularly significant because diesel forms the backbone of the transportation and logistics sectors, intensifying inflationary pressures across the economy.

This same pattern was observed following Russia’s invasion of Ukraine and is now repeating as oil tanker movements through the Strait of Hormuz are disrupted due to Middle East tensions.

This raises a fundamental question: Why does diesel react so much faster than gasoline?

The answer is structural rather than situational, as diesel occupies a pivotal position in the global economy in a way that gasoline does not.

Diesel starts with a lower supply safety margin

One of the less-noticed factors is that diesel typically operates with narrower safety margins. Distillate fuel inventories—which include diesel and heating oil—are often lower than gasoline stocks. In both 2022 and during recent disruptions, these inventories were already below typical seasonal levels before the geopolitical shock occurred, leaving limited room to absorb any sudden supply shortfall.

In contrast, gasoline benefits from larger storage capacities, broader domestic production, and more defined seasonal demand patterns. Diesel lacks these advantages, so it feels any shortage first and most acutely.

Diesel is a global fuel… gasoline is regional

Gasoline is primarily a regional product, often refined and consumed within the same geographic market.

Diesel, however, is the fuel of global trade, powering the ships, trucks, trains, and heavy equipment that move goods across borders.

Therefore, its prices are closely tied to global trade flows. When a vital corridor like the Strait of Hormuz is disrupted, the repercussions ripple through diesel markets worldwide, even in countries that do not rely heavily on Middle Eastern oil, due to its global trade nature.

Demand for diesel is broader and less elastic

Another fundamental difference lies in the nature of demand.

Gasoline demand is mainly linked to passenger vehicles, and consumers can scale back consumption when prices rise.

Diesel, however, fuels sectors that are difficult to forgo, such as:

* Long-haul trucking

* Railways

* Maritime shipping

* Construction and mining

* Agriculture

* Industrial activity

These sectors do not have easy alternatives; goods transport, agricultural operations, or construction projects cannot be halted because of price hikes. Additionally, the spring planting season is one of the most diesel-intensive periods, adding pressure on demand at a sensitive time.

Refineries cannot simply increase diesel production

In theory, higher prices should lead to increased production, but the reality is different. Diesel and gasoline production rely on different parts of an oil barrel, and switching between them is not easy.

Furthermore, diesel production requires complex technical conditions, such as crude quality, processing capabilities, and ultra-low sulfur requirements. Refineries often operate near maximum capacity, especially during high-demand periods, with routine maintenance further reducing flexibility.

In the United States, for example, refineries are currently focused on increasing gasoline production in preparation for the summer driving season, limiting their ability to boost diesel output quickly.

Cumulative seasonal and structural pressures

Diesel also faces seasonal competition for supplies, particularly in winter when demand for heating oil increases. Even outside this season, demand cycles from agriculture, construction, and transportation overlap, maintaining high consumption levels throughout the year.

Diesel is the transmission channel for inflation

Perhaps the most important difference is diesel’s impact on the economy. It is the fuel used to transport goods; thus, rising prices increase transportation costs, which in turn pass through to the prices of food, construction materials, and consumer goods.

In the United States, trucks move about 70% of goods. When diesel prices rise, this increase spreads through supply chains and is often passed on to consumers.

In contrast, gasoline directly affects individuals, but its systemic impact is far less than that of diesel.

The pattern repeats for an obvious reason

What we are seeing today is not an exception, but a repetition. After Russia’s invasion of Ukraine, diesel prices rose much faster than gasoline due to global supply tightness. Today, Middle East disruptions are reproducing the same scenario.

Diesel prices rise faster than gasoline during global crises because the market is tighter in terms of supply, more globally interconnected, and less elastic in its response.

Diesel is not just a fuel… it is the engine of the global economy. When this economy comes under pressure, diesel is the first to move—and with the strongest momentum.

U.S. stocks surged on Friday after Iran announced the "full" reopening of the Strait of Hormuz to commercial navigation, following the ceasefire declaration between Israel and Lebanon.

The Dow Jones Industrial Average jumped by approximately 1005 points, or 2.1%, while the S&P 500 rose 1.3%, surpassing the 7100 level for the first time in history. The Nasdaq also climbed 1.5%, with both indices reaching new record highs during trading. Similarly, the Russell 2000 index hit an all-time high, rising by about 2%.

In a post on the "X" platform, Iranian Foreign Minister Abbas Araghchi announced that "in line with the ceasefire in Lebanon, the passage of all commercial vessels through the Strait of Hormuz has been declared fully open during the truce period, according to the coordinated route previously announced by the Ports and Maritime Organization of the Islamic Republic of Iran."

U.S. President Donald Trump had stated on Thursday that the leaders of Israel and Lebanon agreed to a 10-day truce, which went into effect at 5:00 PM ET.

Following Iran's announcement, oil prices dropped sharply as concerns over supply disruptions receded. U.S. West Texas Intermediate (WTI) crude contracts plunged by about 14% to trade above $80 per barrel, while global benchmark Brent crude contracts fell 13% to trade above $86 per barrel.

In a separate post on "Truth Social," Trump thanked Iran for reopening the Strait, but simultaneously emphasized that the U.S. Navy's naval blockade on Iranian ports "will remain fully in place" until a peace agreement is reached with Tehran, adding: "This process should move very quickly, as most points have already been negotiated."

Hopes for a peace agreement have pushed markets to record levels in recent days, with the three major indices heading toward strong weekly gains; the Dow Jones has risen by about 3%, the S&P 500 by more than 4%, and the Nasdaq has jumped by more than 6%.