23.03.2026 02:09

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The foreign exchange market experienced a notable shift this Monday as the EUR/JPY currency pair dipped towards a low of approximately 184.00, reflecting increased uncertainty driven by escalating tensions in the Middle East. Trading during the initial phase of the Asian session saw the Japanese Yen (JPY) gain ground against the Euro (EUR), a dynamic largely attributed to the surge in demand for safe-haven assets spurred by the unfolding crisis.

At the heart of this movement was a stark announcement from Iran’s Islamic Revolutionary Guard Corps (IRGC). They declared a definitive closure of the Strait of Hormuz should United States President Donald Trump follow through on his threats to target a significant Iranian energy facility. This declaration coincided with Trump’s issuance of a 48-hour ultimatum, demanding the immediate reopening of the waterway to maritime traffic, warning of devastating consequences – the potential destruction of Iran’s vital energy infrastructure – if his demands were not met. The prospect of a protracted and volatile conflict in the region immediately fueled speculation about a strengthening Yen.

Analysts suggest that the potential for a prolonged Middle Eastern conflict could significantly benefit the JPY, acting as a considerable headwind against the EUR/JPY cross in the immediate future. Adding to this dynamic, indications suggest that Japanese authorities are prepared to actively intervene in the foreign exchange market, potentially bolstering the Yen’s upward trajectory through strategic measures. Attyushi Mimura, Japan’s top foreign exchange official, explicitly stated the government’s readiness to deploy a comprehensive range of tools to manage any observed volatility.

However, the currency pair’s direction isn’t solely dictated by geopolitical events. Later on Monday, the focus will turn to statements from policymakers at the European Central Bank (ECB). Any signals of a more hawkish stance – a move towards tighter monetary policy – from these officials could, in turn, provide support to the Euro, potentially offsetting some of the JPY’s gains.

Looking ahead, the release of Japan’s National Consumer Price Index (CPI) inflation report for February on Tuesday is anticipated to be a key event. Market participants will be closely scrutinizing the data for clues about the Bank of Japan’s future policy direction.

To provide context for understanding market sentiment, it’s important to grasp the concepts of “risk-on” and “risk-off.” “Risk-on” describes a market environment where investors exhibit optimism and a willingness to invest in assets perceived as potentially higher-yielding, even if they carry greater risk. Conversely, a “risk-off” market is characterized by investor caution, a preference for safer, more stable investments, and a general reluctance to take on significant risk. These shifts in investor sentiment profoundly influence currency valuations and broader market trends.