Oil Drops on US-Iran De-Escalation; USD/JPY, EUR/USD in Focus

Oil prices declined sharply during the European session as markets grew increasingly confident in a de-escalation of US-Iran tensions following reports that the US halted strikes on Iran. The risk-off unwind has broad implications across forex markets. USD/JPY faces pressure as Japanese Prime Minister Takaichi called for an exit from excessively tight fiscal policy, signaling potential shifts in Japan's economic stance that could weigh on the yen. In the eurozone, ECB policymakers delivered mixed signals, with Žigman emphasizing data dependency for the September rate decision while Kazimir insisted at least one more rate hike would be needed, creating uncertainty for EUR/USD positioning. Traders are also eyeing big tech earnings this week on Wall Street, which could drive broader risk sentiment and dollar flows. Germany's economic outlook remains a key factor for euro direction. The geopolitical premium unwinding from oil markets is reducing safe-haven demand, potentially pressuring CHF and JPY while supporting risk-sensitive currencies like AUD and CAD. Traders should monitor further US-Iran developments for sudden sentiment shifts.