The market is reacting to a temporary relief valve, not a full resolution. The core issue remains the Strait of Hormuz, one of the most important oil chokepoints in the world. According to the U.S. Energy Information Administration, about 20 million barrels per day moved through the strait in 2024, equal to roughly 20% of global petroleum liquids consumption, and only limited alternative pipeline capacity is available if disruption persists. That is why even a modest drop in oil prices should be read as tactical relief rather than a clean return to normal market conditions.
What This Means for the U.S. Market:
For U.S. assets, this is now a classic inflation versus growth stress test. Wall Street sold off sharply on Thursday, with the Dow down 1.56%, the S&P 500 down 1.52%, and the Nasdaq down 1.78%, while energy was the only major S&P sector to finish higher.
Why the Dollar Has Been Benefiting: The U.S. dollar has regained support because this shock is hitting oil importers harder than the United States. Reuters reported that the dollar rose against the euro for a third straight day on Thursday, climbing more than 1.5% against a basket of major currencies and approaching its strongest level since November, helped by both safe haven demand and the fact that the U.S. is a net energy exporter.
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Oil around the $100 area: If crude stabilizes lower, some of the panic bid in USD can fade. If oil resumes climbing, the market is likely to revive the view that inflation will stay sticky and push back Fed easing further. Reuters columnist Jamie McGeever cited estimates that a sustained $10 rise in oil can add up to 0.2 percentage point to annual U.S. inflation.
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Fed repricing and Treasury yields: The market is already cutting back expectations for rate cuts this year, and that has been one of the clearest supports for the dollar. Reuters reported that projected Fed easing for 2026 has been pared back sharply as oil keeps inflation fears alive.
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EUR/USD and USD/JPY sensitivity: The euro has been pressured by Europe’s energy vulnerability, while the yen has also weakened as higher oil costs weigh on Japan’s import bill. Reuters noted that since the war began, the euro, yen, rupee, and won have all been among the notable underperformers versus the dollar.
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Risk sentiment in equities and broader cross asset markets: A deeper equity selloff can keep the dollar supported near term, but if the growth scare begins to dominate and the market starts looking toward eventual Fed easing again, the dollar reaction can become more mixed.
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-KẾT THÚC-