Recent geopolitical tensions in the Middle East have driven Brent crude prices sharply higher, lifting euro-area inflation to 3.2 percent in May—its highest level in over two and a half years—and prompting traders to price in multiple ECB rate hikes, with the first potentially arriving as soon as mid-June. This contrasts with expectations for a more accommodative Federal Reserve path amid softer U.S. growth signals, widening the policy divergence that typically supports the dollar. Eurozone GDP was revised lower to show a Q1 contraction, the first since late 2022, adding downside pressure on the euro. With EUR/USD holding near 1.154–1.157 in early June after a 2 percent monthly decline, upcoming central bank communications and inflation releases will remain key swing factors for any sustained move toward higher levels this year.