The move followed a report by Iran’s Fars News Agency claiming that two missiles struck a U.S. warship attempting to pass through the Strait of Hormuz—one of the world’s most critical oil transit routes. The report heightened concerns over potential disruptions to global energy flows and broader regional escalation.
In currency markets, the dollar strengthened broadly, with the dollar index rising 0.3% to 98.542, reflecting increased demand for safe-haven assets amid rising uncertainty.
The index tracks the US currency against six major peers and typically gains when investors move away from riskier assets such as equities and emerging market currencies.
Risk sentiment weighed heavily on European stocks. The pan-European STOXX Europe 600 fell 0.9%, while the blue-chip Euro STOXX 50 dropped more sharply by 1.7%, reflecting broad-based selling across sectors sensitive to geopolitical risk and energy price volatility.
Investors appeared to be pricing in heightened uncertainty, particularly around potential disruptions to shipping routes and oil supply chains through the Strait of Hormuz, a key chokepoint for global crude exports.
European government bond markets also moved in response to shifting risk expectations. Germany’s 10-year yield, the eurozone benchmark, rose 5 basis points to 3.082%, indicating falling bond prices as investors adjusted to inflation and risk-premium concerns.
Bond yields typically move inversely to prices, and the uptick suggests a mild rotation out of sovereign debt amid changing global risk dynamics.
The Strait of Hormuz has long been viewed as one of the most sensitive geopolitical pressure points in global trade, with any perceived threat to its security often triggering swift reactions across oil, currency, and equity markets.
While details of the reported incident remain unverified beyond the Iranian news agency report, the market reaction underscores how quickly sentiment can shift when tensions rise in key energy corridors.
For now, investors appear to be positioning defensively, favouring the dollar and trimming exposure to equities and bonds as they await clearer signals on whether the situation escalates further.