TOKYO — The yen and euro weakened Tuesday in Asian trading as the U.S. dollar held near a five-week high. An energy supply shock tied to the widening U.S.-Israeli air war against Iran lifted oil and gas prices, reviving inflation worries and pushing traders to delay rate-cut bets, March 3, 2026.
The dollar index was around 98.49 after a 0.9% surge in the previous session, while the euro hovered near $1.1695 and the yen traded around 157.2 per dollar in early Tuesday dealing, according to Reuters’ snapshot of G10 currency moves.
Yen slips as energy-import fears return
Currency strategists said the initial market reaction has punished economies that rely heavily on imported fuel, a dynamic that can outweigh the yen’s usual safe-haven appeal when energy prices spike. Japan’s Finance Minister Satsuki Katayama also signaled intervention in the currency market remains an option, saying officials are monitoring moves with an “extremely strong sense of urgency,” and are in close contact with overseas counterparts.
Traders were also watching for clues from Bank of Japan Gov. Kazuo Ueda as investors debate whether higher imported energy costs complicate Japan’s already delicate policy path. Earlier, BOJ Deputy Gov. Ryozo Himino said market volatility would not automatically block further tightening as the central bank evaluates whether underlying inflation is stabilizing around its 2% target, according to a Reuters report on Himino’s comments.
Energy shock boosts the dollar and pushes rate-cut bets out
The dollar’s broad bid has been fueled by the one-two punch of haven demand and renewed inflation sensitivity. Oil and gas markets jumped after strikes and retaliatory attacks disrupted energy facilities and threatened shipping through the Strait of Hormuz, a key chokepoint for global crude and liquefied natural gas flows, according to Reuters’ coverage of the energy-market move.
That inflation risk is showing up quickly in rate expectations. Futures pricing has pushed out the point at which traders fully price the next Federal Reserve cut, even as markets still anticipate easing later this year. For a real-time view of how traders are mapping Fed outcomes meeting by meeting, many investors track the CME FedWatch Tool, which translates fed funds futures into implied probabilities.
Euro under pressure as Europe’s energy exposure comes back into focus
In Europe, the same energy shock has revived memories of the region’s earlier energy crunch and reopened questions about how much room the European Central Bank has to keep easing if fuel costs stay elevated. Traders have pared expectations for additional cuts later this year as higher energy prices threaten to lift inflation while weighing on growth, according to a Reuters report on European market pricing.
Even with the eurozone more diversified on energy supply than in prior years, analysts noted that Europe remains structurally exposed to a sustained rise in import costs, particularly if shipping disruptions linger or expand. The near-term question for the euro is whether the conflict-driven jump in energy prices proves temporary — or becomes persistent enough to alter the ECB’s inflation path and investors’ global allocation back toward the dollar.
What past energy crises did to the yen and euro
The energy-import penalty for the yen is not new. During the 2022 surge in global inflation and aggressive Fed tightening, the dollar hit a 20-year high against Japan’s currency amid a widening policy gap between the Fed and the BOJ, as detailed in a Reuters report from April 2022.
Later that year, Japan’s swelling fuel import bill was a major political and economic pressure point as the weaker currency amplified costs for households and businesses, according to a Reuters report on Japan’s import surge.
For the euro, energy stress has also proved pivotal. In mid-2022, the single currency hit parity with the dollar amid recession fears and Europe’s vulnerability to gas and oil shocks linked to geopolitical conflict, as reported by Al Jazeera’s coverage of the euro reaching parity.
For now, traders say the key variables are how long the disruption lasts, whether energy flows normalize quickly, and how central banks balance the trade-off between supporting growth and keeping inflation in check. Until those questions are answered, the dollar’s resilience — and the pressure on the yen and euro — is likely to remain a defining theme in global markets.
