The euro edges slightly higher, holding above 1.1600, though gains remain limited as ongoing tensions in the Middle East weigh on upside momentum.

EUR/USD edges higher around 1.1635 in early Tuesday Asian trading. However, fresh geopolitical tensions in the Middle East may pressure the euro as a risk-sensitive currency. Meanwhile, ECB’s Schnabel cautioned that such shocks can no longer be overlooked.

EUR/USD posts modest gains near 1.1635 in early Tuesday Asian trading, though upside momentum may remain capped amid rising geopolitical risks. Iran’s announcement to halt indirect talks with the US and fully close the Strait of Hormuz has heightened risk-off sentiment, potentially supporting safe-haven flows into the US dollar.

Meanwhile, preliminary Eurozone HICP data is due later on Tuesday and may provide fresh direction for the pair.

According to CNBC, Iranian negotiators will stop communicating with the US via intermediaries and move to close the Strait of Hormuz in response to alleged ceasefire violations. US President Donald Trump said he urged Israeli Prime Minister Benjamin Netanyahu to avoid a major strike on Beirut, claiming Israeli forces were pulled back. However, Netanyahu disputed this, stating that operations against Hezbollah in southern Lebanon will continue.

Escalating tensions in the Middle East could strengthen the US dollar as a safe-haven asset, weighing on EUR/USD.

On the European side, the euro may find some support from the ECB’s relatively hawkish tone. ECB Executive Board member Isabel Schnabel noted that inflationary pressures linked to the Iran conflict can no longer be ignored, as price increases are broadening beyond energy and inflation expectations risk becoming unanchored.