The EUR/USD pair posts modest gains around 1.1635 during the early Asian session on Tuesday. Nonetheless, the potential upside might be limited, as Iran announced a halt to US negotiations and a full closure of the Strait of Hormuz, which could prompt risk-off sentiment. The preliminary reading of the Harmonized Index of Consumer Prices (HICP) from the Eurozone will be released later on Tuesday.
Iranian negotiators will stop exchanging messages with the United States (US) through intermediaries, and Iran will move to fully close the Strait of Hormuz, in retaliation for ongoing ceasefire violations, per CNBC. US President Donald Trump said on Monday that he called Israeli Prime Minister Benjamin Netanyahu and asked him not to proceed with a major raid on Beirut, and that Israeli troops were turned around.
However, Netanyahu contradicts Trump, emphasizing that he will continue operating against Hezbollah in Southern Lebanon. Escalating Middle East conflicts could boost a safe-haven currency such as the US dollar (USD) and act as a headwind for the major pair.
Across the pond, the hawkish stance of the European Central Bank (ECB) could provide some support to the shared currency. ECB executive board member Isabel Schnabel said on Monday that the central bank can no longer overlook the inflationary impact of the conflict in Iran, as price pressures have spread beyond the energy sector and the risk of unanchored inflation expectations has risen.
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