USD/JPY Surges Amid Energy Shock from Iran Conflict

The conflict between the US and Israel against Iran has had a significant impact on currency markets, with the disruption of the Strait of Hormuz leading to a clear divide between energy haves and have-nots.

The USD/JPY pair has been driven higher due to the energy shock, as the US is an energy superpower and largely self-sufficient, while Japan remains heavily dependent on energy imports.

Markets are now waiting to see how much tolerance Donald Trump has for keeping the conflict going before the political costs outweigh the strategic benefits. The Dow Jones Industrial Average fell around 3% last week, but still remains well short of triggering a policy rethink from Trump.

The surge in energy prices may prove more politically sensitive than the decline in the Dow, with RBOB gasoline futures jumping 20.18% and pushing the front-month contract to levels not seen since early 2024.