What Will Happen to the Euro in the Near Future: Risks Against the Backdrop of the Energy Crisis

Experts have started raising alarms about the European currency. According to analysts from ING, the euro may face significant downward pressure in the near future. The main reason is the escalation of military tensions in the Middle East, which directly affects global energy prices. Rising energy costs create an unfavorable backdrop for the European economy, which will inevitably impact euro quotes.

Energy Crisis as the Main Challenge for the Euro

The war in the Middle East has led to increases in oil and gas prices on global markets. For Europe, which is heavily dependent on energy imports, this creates a double blow: on one hand, rising costs for production and heating; on the other, pressure on the balance of payments. Chris Turner from ING notes that the energy factor could become the main obstacle to strengthening the euro this year.

Disappointed Investor Expectations

Until recently, market participants were optimistic about the recovery of the euro and European assets. Many investors expected an improvement in the economic situation in the Eurozone. However, military events and the subsequent surge in energy prices have significantly undermined these optimistic scenarios. Hopes for euro stabilization are now in doubt, and the market is overestimating the prospects for the situation’s development.

Specific Scenario: Fall to 1.1575

If the conflict in the Middle East does not de-escalate in the coming weeks, Turner warns of a risk of the euro falling to 1.1575 against the US dollar. This scenario reflects the possible intensification of negative pressure on the European currency amid the ongoing energy crisis. The analyst emphasizes that the timing is critical: the longer the tension persists, the higher the likelihood of experiencing such movement.

The Dollar Gains from the Energy Shock

Paradoxically, the energy crisis is strengthening the US dollar. Thanks to its energy independence, the United States is not under pressure from rising oil and gas prices. This makes the US dollar an attractive safe haven for investors amid uncertainty. At the same time, the Federal Reserve supports the dollar through tight monetary policy: rising inflation prospects and the risk of an energy shock reduce the likelihood of further interest rate cuts. Therefore, the outlook for the euro in the near future does not look optimistic, given the strengthening dollar and energy challenges.