The Japanese yen began the week on the back foot, slipping against most of its major rivals as a renewed jump in oil prices rippled through the currency market. The trigger was the same one unsettling traders elsewhere: escalating conflict in the Middle East, which has pushed crude sharply higher and, in turn, punished the currencies of economies that lean on imported energy. Japan, which buys almost all of the oil it burns from abroad, sits squarely in that group, so the yen quickly felt the strain.
Against the US dollar the picture was slightly different. The yen actually firmed a touch, with USD/JPY changing hands near 162.35 in early European trade on Monday. Live market data put the pair at 162.49, barely moved from the prior close of 162.51, a shift of roughly a hundredth of a percent. So while the yen lost ground broadly, it clung to a marginal gain against a dollar that was itself soft on the day. The greenback's weakest showing came against the New Zealand dollar.
Why higher oil hurts the yen
The link between crude and the yen is straightforward. When energy costs climb, countries that import their fuel must sell more of their own currency to pay for it, and the trade balance tilts against them. For Japan, an advanced economy with almost no domestic oil, a sustained rise in prices is a direct headwind. That is why the latest leg up in crude, sparked by supply fears rather than stronger demand, translated so quickly into selling pressure on the yen and other Asian-Pacific currencies tied to imported energy.
The Strait of Hormuz at the centre
The flashpoint is the Strait of Hormuz, the narrow shipping lane that carries close to 20% of the world's energy supply. Any threat to traffic through the passage is enough to move the oil market, and right now the threat is real. Iranian military forces have kept up attacks on tankers trying to make the transit, and the steady drumbeat of strikes has shaken shipping companies' willingness to route vessels through the chokepoint. Fewer ships willing to run the gauntlet means tighter supply and firmer prices, which feeds straight back into the currency story.
Where USD/JPY sits on the charts
Technically, the dollar remains firmly in charge of the longer trend even after Monday's flat session. Live readings show USD/JPY holding well inside a rising channel, trading above its major moving averages, with the 52-week span running from 146.22 up to 162.84. The relative strength index sits around 62, elevated but not yet at an extreme, while momentum indicators have started to cool, hinting the recent climb may be catching its breath. Nearby resistance clusters just under 162.84, the top of the yearly range, with support layered toward 160.62 should the mood turn.
Two central banks on deck
Adding to the caution is a crowded calendar. Both the Bank of Japan and the US Federal Reserve hold policy meetings next week, and each is widely expected to keep interest rates on hold. That leaves the yen without an obvious domestic catalyst to counter the pull of higher oil, and it keeps the focus on external forces, energy prices and the Middle East above all, for direction in the days ahead. With neither central bank tipped to move, traders are likely to lean on the oil narrative and the tone of the guidance from each meeting rather than the rate decisions themselves.
A broader squeeze on risk
This pressure is not the yen's alone. The oil-driven move reaches into every economy that buys its energy from abroad, weighing on their currencies at the same time. As long as the Strait of Hormuz stays in the headlines and crude keeps its bid, the currencies of energy-hungry economies, the yen among them, will find it hard to catch a break. For now the yen's fate is tied less to Tokyo and more to what happens around a narrow strip of water thousands of miles away.
