Dollar Set for Weekly Gain on Stalled US-Iran Talks and Middle East Uncertainty

US dollar banknotes (Reuters)
US dollar banknotes (Reuters)
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Dollar Set for Weekly Gain on Stalled US-Iran Talks and Middle East Uncertainty

US dollar banknotes (Reuters)
US dollar banknotes (Reuters)

The dollar was on track for its first weekly gain in three weeks on Friday in broadly muted trading, as stalled peace negotiations between the US and Iran dampened hopes for an immediate easing of Middle East tensions.

While Lebanon and Israel extended their ceasefire for three weeks ahead of its expiration on Sunday, Iran showed off its control over the Strait of Hormuz by releasing footage of its commandos storming a huge cargo ship, leaving the timing of the reopening of the world's most important shipping corridor uncertain and keeping oil prices elevated.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, slipped 0.1% to 98.75 but remained on track for a weekly gain of 0.5%. The euro was 0.1% higher at $1.169, Reuters reported.

Sterling edged 0.1% higher, with stronger-than-expected UK retail sales for March barely moving the needle.

"If you look at the last week the major theme is just that there's no real progression with peace talks. For markets, it's difficult when there's no deadline," said Tommy Von Brömsen, FX strategist at Handelsbanken in Stockholm.

Brent crude futures rose 1.5% to $106.60 a barrel.

The dollar has drawn safe-haven demand amid the uncertainty. It gained ground in March as concerns over the conflict deepened, but gave back some of those gains this month as optimism over a potential resolution grew.

"Oil and the dollar are still moving pretty closely together, and with crude creeping back up ... I'd say the dollar is still staying fairly firm," said Sho Suzuki, a market analyst at Matsui Securities.

Meanwhile, the yen was steady after four days of losses, rising 0.1% to 159.7 per dollar.

CENBANK BONANZA LOOMS

Traders are looking ahead to a central-bank-heavy week next week, with the Bank of Japan, European Central Bank, Bank of England and Federal Reserve among those due to deliver policy decisions.

"The main message from the central banks is that they are - so far at least - in a kind of 'wait-and-see' approach," said Handelsbanken's Von Bromsen.

He said the focus will be on communication and guidance, as market watchers assess how policymakers are digesting not just higher energy prices but the second-round effects of potentially higher inflation.

The European Central Bank will hold its deposit rate on April 30 but hike it in June, according to just over half of economists polled by Reuters, in a bid to protect a war-induced energy shock from knocking the euro zone economy off balance.

Meanwhile in Japan core consumer inflation slowed below the central bank's 2% target for a second straight month in March. Analysts, though, expect inflation to accelerate back above the Bank of Japan's target in coming months, as companies begin to pass on higher fuel costs from the Middle East conflict.

The BOJ is set to hold its two-day policy meeting ending on Tuesday. Reuters reported the bank is likely to hold off raising interest rates next week as fading prospects of a near-term end to the Middle East war keep the country's economic and price outlook highly uncertain. The BOJ is still expected to signal its readiness to hike to counter mounting price pressures.

Japanese Finance Minister Satsuki Katayama reiterated her verbal warning on intervention on Friday that authorities can take "decisive" action against speculative moves in the foreign exchange market, a day after saying Japan has a "free hand" to intervene and that past interventions had been effective.

The Australian dollar rose 0.1% versus the greenback to $0.7135. New Zealand's kiwi rose 0.1% to $0.5859.

In cryptocurrencies, bitcoin was little changed at $77,895.85.



Asian Shares Mostly Gain and Oil Prices Fall After Trump Says Peace Talks on Iran War Are Proceeding

 People walk in front of an electronic stock board showing Japan's Nikkei index at a securities firm Monday, May 25, 2026, in Tokyo. (AP)
People walk in front of an electronic stock board showing Japan's Nikkei index at a securities firm Monday, May 25, 2026, in Tokyo. (AP)
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Asian Shares Mostly Gain and Oil Prices Fall After Trump Says Peace Talks on Iran War Are Proceeding

 People walk in front of an electronic stock board showing Japan's Nikkei index at a securities firm Monday, May 25, 2026, in Tokyo. (AP)
People walk in front of an electronic stock board showing Japan's Nikkei index at a securities firm Monday, May 25, 2026, in Tokyo. (AP)

Asian shares mostly rose Monday and oil prices plunged after US President Donald Trump said talks on ending the war with Iran are progressing.

Japan's benchmark Nikkei 225 surged 2.8% to 65,130.03. Australia's S&P/ASX 200 added 0.4% to 8,692.00. The Shanghai Composite gained 0.8% to 4,143.97.

Trading was closed in South Korea and Hong Kong for local holidays. Markets will be closed in the US on Monday for Memorial Day.

Trump said negotiations with Iran were “proceeding in an orderly and constructive manner.” Meanwhile, regional officials told The Associated Press on Sunday that the United States is close to reaching a deal with Iran that would end the war, reopen the Strait of Hormuz and see Iran give up its stockpile of highly enriched uranium,

Reopening the Strait of Hormuz will help decide the direction of oil prices. The closure has prevented oil tankers from exiting the Gulf and delivering crude to customers worldwide. Japan, for instance, imports almost all its oil, most of it through the strait.

“Markets are rapidly transitioning from pricing geopolitical fear toward pricing a potential peace dividend as Hormuz reopening expectations pressure oil and the dollar lower,” analyst Stephen Innes said in a commentary.

Early Monday, benchmark US crude was down $5.52 at $91.08 a barrel. Brent crude, the international standard, sank $5.56 to $97.08 a barrel.

In currency trading, the US dollar declined to 158.91 Japanese yen from 159.16 yen. The euro cost $1.1639, up from $1.1605.

Friday on Wall Street, stocks finished their eighth straight winning week, the best such streak since 2023. That’s even though a survey showed US consumers are feeling even worse about the economy than before.

The S&P 500 added 0.4% and pulled closer to its all-time high set in the middle of last week. The Dow Jones Industrial Average rose 0.6%, and the Nasdaq composite gained 0.2%.

Recent earnings reports from US companies that topped analysts’ expectations also helped markets. But worries about inflation have pushed bond yields higher worldwide.

The yield on the 10-year Treasury edged down to 4.56% Friday from 4.57% late Thursday, but it remains well above its 3.97% level from before the war.


Vessels Carrying Middle East Oil, LNG Exit Hormuz, Head for Pakistan, China

Vessels in the Strait of Hormuz, Iran, May 22, 2026. Majid Asgaripour/WANA (West Asia News Agency) via Reuters
Vessels in the Strait of Hormuz, Iran, May 22, 2026. Majid Asgaripour/WANA (West Asia News Agency) via Reuters
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Vessels Carrying Middle East Oil, LNG Exit Hormuz, Head for Pakistan, China

Vessels in the Strait of Hormuz, Iran, May 22, 2026. Majid Asgaripour/WANA (West Asia News Agency) via Reuters
Vessels in the Strait of Hormuz, Iran, May 22, 2026. Majid Asgaripour/WANA (West Asia News Agency) via Reuters

Two liquefied natural gas tankers are exiting the Strait of Hormuz on Monday, heading to ‌Pakistan and China, while a supertanker with Iraqi crude for China left the Gulf on Saturday after being stranded for nearly three months, shipping data showed.

The US-Israeli war on Iran that began on February 28 has severely curtailed shipping through the Strait of Hormuz, through which around one-fifth of the world's supply of oil and LNG normally flows.

The vessels are among a handful of supertankers exiting the Gulf this month via a transit route ⁠that Iran has ordered ships to use. Last week, three Very Large Crude Carriers (VLCCs) made their way to China and South Korea with 6 million barrels of crude, according to Reuters.

LNG tanker Fuwairit is crossing the Strait of Hormuz on Monday and is expected to discharge its cargo in Pakistan on Tuesday, shipping data on LSEG and Kpler showed. The vessel, sailing under the Bahamas flag, loaded LNG at Qatar's Ras Laffan port around March 28.

Separately, the VLCC Eagle Verona, which exited the strait on Saturday, is expected to reach Ningbo port in eastern China on June 12 to discharge its cargo, ⁠shipping data on LSEG and Kpler showed.

The Singaporean-flagged vessel chartered by Unipec, the trading arm of Asia's largest refiner, Sinopec, loaded nearly 2 million barrels of Basrah crude around February 26, according to the data.

The Eagle Verona was among seven ships Malaysia had sought ⁠permission from Iran to transit, two sources earlier told Reuters. Five of the ships have since exited the waterway, while two more remain in the Gulf.

Before the war began, shipping traffic through the strait averaged 125 to 140 daily passages. Some 20,000 seafarers remain stranded inside the Gulf on board hundreds of ships.


Moody’s Affirms Saudi Arabia ‘Stable’ Outlook Despite Geopolitical Risks

Saudi capital, Riyadh (Reuters) 
Saudi capital, Riyadh (Reuters) 
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Moody’s Affirms Saudi Arabia ‘Stable’ Outlook Despite Geopolitical Risks

Saudi capital, Riyadh (Reuters) 
Saudi capital, Riyadh (Reuters) 

A Saudi Arabia’s sovereign credit rating affirmed at “Aa3” with a stable outlook by Moody’s last week came as an international testament to the resilience of the Kingdom’s economy and its ability to absorb the region's most violent geopolitical shocks, most notably the closure of the Strait of Hormuz since early March.

Moody’s recent rating did not only observe the Saudi strong fiscal position, but it highlighted the sustained government spending and the continued functioning of key logistics infrastructure, particularly the East–West pipeline, which have allowed the trade flows to be maintained.

The agency affirmed that stronger than expected diversification momentum, especially if supported by a durable reduction in geopolitical tensions, could strengthen Saudi Arabia's growth and fiscal prospects in line with the targets of Vision 2030.

Flexible Logistic Alternatives

In its report, Moody’s explained that the affirmation at Aa3 reflects Saudi Arabia's large and wealthy economy, supported by its vast hydrocarbon endowment, low production costs and highly competitive position in global energy markets, alongside improving institutional and policy effectiveness.

It noted that progress under Vision 2030 has underpinned solid non-hydrocarbon growth, supported by sustained public investment, structural reforms, and gradually improving fiscal and economic transparency.

In an analytical reading of the reality of the current regional conflict, Moody’s placed a key scenario assuming continued disruptions of trade flows in the Strait of Hormuz. It affirmed that its decision to maintain a stable outlook reflects expectation that Saudi Arabia's credit profile will remain resilient thanks to its ability to divert most of its oil exports through the Red Sea and its financial assets.

The credit rating agency noted that the East–West pipeline has been key to the country's ability to continue exporting crude oil since early March.

“The pipeline is already carrying 7 mb/d crude oil and the export terminals on Red Sea have been able to load up to 5 mb/d of crude oil equivalent to two-thirds of pre-conflict export levels,” it wrote.

Oil Revenues

At the financial level, Moody’s said that while oil production and export volumes will remain below pre conflict levels due to the effective closure of the strait, this will be more than offset by significantly higher oil prices, which it expects to average $90–110 per barrel in 2026.

As a result, it noted, Saudi government revenue is likely to exceed pre-conflict expectations, providing the authorities with flexibility to increase spending on economic support measures, subsidies and defense.

Also, Moody’s said it expects an improvement in both fiscal and external positions, despite higher spending and government debt burden to remain moderate at around 32% of GDP in 2026, broadly in line with similarly rated peers.

Sorting

Overall, the rating agency said it expects a contraction in Saudi real GDP of around 1.7% in 2026, reflecting a 10% decline in hydrocarbon output and a slowdown in non oil activity amid weaker confidence and higher costs.

However, Moody’s conservative outlook for 2026 matches with positive Saudi official figures. Flash estimates by the General Authority for Statistics (GASTAT) showed that real GDP increased by 2.8% in Q1of 2026 compared to Q1of 2025. This increase was driven by growth across all main economic activities, as non-oil activities rose by 2.8%, reflecting a robust domestic economy and its resistance to external shocks.

Meanwhile, IMF’s growth forecasts for Saudi Arabia in 2026 seem more optimistic. The Fund said the Kingdom is expected to lead regional growth at about 3.1% this year, supported by alternative pipeline capacity.

It noted that growth is forecast to accelerate to 4.5% in 2027, pointing to stronger medium-term prospects. Saudi Arabia has relied on an east-west pipeline to transport oil overland to the Red Sea, ensuring uninterrupted supply to customers despite disruptions to Gulf shipping routes.

While the IMF favored gradual acceleration, Moody’s offered a more-optimistic scenario for next year, saying that “in 2027, we expect a sharp rebound, with growth around 8%, as trade flows through the Strait normalize, oil production gradually increases and oil prices decline from elevated levels.”

Over the medium term, the rating agency said government debt will rise gradually, approaching around 40% of GDP, broadly in line with similarly rated peers, and supported by the sovereign's sizeable GFAs (which we estimate around 18% of GDP) and continued access to financing.

Non-Oil Economy

Moody’s expects Saudi non-hydrocarbon private sector GDP growth to return to around 4–5% after the conflict subsides, among the strongest rates in the Gulf Cooperation Council (GCC), reflecting ongoing structural reforms, sustained public investment and improving private sector participation.

This trend will, over time, reduce the sovereign's exposure to oil market downturns and long-term carbon transition risks, the agency said.

It noted that large scale projects, particularly those led by the Public Investment Fund (PIF) are entering phases that expand capacity in services sectors such as hospitality, tourism, entertainment, retail and restaurants, supporting demand and employment.

“PIF's new strategic plan 2026-2030 is consistent with the approximately $200 billion invested domestically over 2021–25 or 16% of 2025 nominal GDP,” the agency noted in its report.

Financial Flexibility

At the same time, Moody’s said prior fiscal reforms have improved the resilience of Saudi government finances to oil price fluctuations.

In particular, the introduction of a broad-based 15% value-added tax, with limited exemptions, has significantly increased non-hydrocarbon revenue, which accounted for around 45% of total revenue in 2025 against 36% in 2016, it noted.

This represents a meaningful improvement compared to the past and reduces fiscal sensitivity to oil market cycles.

As a result, Moody’s said, Saudi economy and public finances will continue to be better positioned to absorb oil price shocks than in previous downturns, supporting the credit profile over time.

The agency noted that while the country's debt trend was notably sensitive to oil price and production volatility affecting nominal GDP, the current fiscal position allows the Kingdom to maintain a sustained capital spending on Vision 2030 strategic projects, while benefiting from efficient expenditure controls and a high ability to mitigate domestic and international debt markets, which protects the government's net financial assets and maintains the Kingdom's high creditworthiness.