Crude Oil still commands the tape and the Dollar drifts as geopolitics hits pause

The Dollar’s geopolitical safety bid is easing, and the market is telling you exactly why: Oil is still the sheriff in this town, and it hasn’t handed over the badge. Brent may be taking a breather below $80, but make no mistake—black gold still calls the shots. As long as every headline dances on the razor’s edge of escalation in the Middle East, FX markets remain tethered to crude’s heartbeat.

Traders utilized the White House’s two-week delay on Iran strikes as an opportunity to reduce strategic dollar exposure longs. Why? Because without a hot headline or a bunker-buster boom, the dollar’s geopolitical premium ebbs. The Fed’s on mute, the data calendar is a snooze, and the euro’s drift back above 1.150 tells you the risk tide is gently shifting out.

EUR/USD isn’t exactly in breakout territory, but the absence of new War Room hawkish fuel combined with a tempered risk landscape gives it some breathing room. The pair is likely to consolidate here into the weekend, unless oil prices spike or something terminal happens out of Tel Aviv or Tehran. Don’t confuse drift with direction—oil is the catalyst, and crude is still loaded in the chambers.

Meanwhile, in Europe, Norges Bank pulled a fast one with a surprise 25bp cut—proof that even the most hawkish holdouts are feeling the gravity of slowing global momentum. That tees up two more cuts for Norway this year and keeps EUR/NOK gently skewed higher, even if the krone gets the occasional oil-flavored boost.

Over in the UK, the BoE gave the market its usual serving of beige, but the 6-3 vote split quietly slipped a dovish breadcrumb into August’s outlook. GBP didn’t flinch much, but traders are already sharpening their blades for another potential rate cut. EUR/GBP still has tailwinds here—so long as UK data stays soft and eurozone energy risks don’t explode.

But back to the main show: energy risk remains the spine of this market. Oil doesn’t need to rally hard to stay influential—it just needs to stay hot enough to keep hedges on. If Trump presses go on a B-2 playbook, or if Iran decides to use tankers as leverage, the dollar catches a bid, and gold goes into warp speed. But until then, it’s drip-feed geopolitics and positioning recalibration.

Bottom line: this isn’t a dollar story—it’s still an oil story. And oil isn’t done writing market scripts.