Goldman sees Dollar strength as energy prices rise, equities fall By Investing.com

Wall Street futures fell as energy prices climbed and the dollar strengthened amid concerns over a potential U.S.-Hormuz blockade scenario. Brent at $103/bbl and European natural gas at EUR48/MWh are seen as a drag on external balances, with Goldman Sachs estimating a 1.3 percentage point hit to Hungary’s net energy balance versus 2025. Hungary’s election outcome is a partial offset, as expected EU fund disbursements could materially improve growth, the external account, and support further forint appreciation.

Analysis

The market is treating this as a relative-price shock rather than a pure risk-off event, which matters because the first-order winners are not the obvious hedges. Energy importers with cleaner external balances and credible policy backstops can outperform even if global equities remain under pressure; that is why currencies with stronger current-account sensitivity should underperform unless they can pass through higher input costs. The bigger second-order effect is that a sustained oil/gas spike tightens financial conditions through the dollar and rates channel, raising stress for high-beta EMs and any sovereigns dependent on imported energy and external financing.

The most interesting setup is Hungary: the currency can rally on policy repricing even while the economy faces a worse energy bill. If EU funds begin to flow, the fiscal impulse can offset a meaningful share of the imported-energy drag over the next 6-12 months, but that trade only works if Brussels clearance is fast enough to beat the next leg higher in gas/oil. In other words, the FX story is less about commodity beta and more about a compressed political risk premium suddenly being re-rated lower.

The contrarian view is that the market may be overestimating how durable this terms-of-trade move is if the Gulf disruption does not persist. Historically, FX moves tied to geopolitical supply shocks mean-revert faster than equities price in because central banks and fiscal authorities can buffer the macro impact within one or two policy meetings. If energy prices stabilize within days rather than weeks, the dollar bid and EM underperformance likely fade before the broader equity de-risking completes.

Key Decisions for Investors

• Long HUF versus EUR for 1-3 months via forwards or spot; target 4-6% upside if EU funding/Euro-adoption expectations are repriced, with a tight stop if energy prices normalize or Brussels delays approval.
• Short EUR and JPY against USD for the next 2-4 weeks; both are vulnerable to imported-energy pressure and weaker external terms of trade, with better carry/risk-reward than fading the equity tape directly.
• Pair trade: long NOK/ CAD vs short EUR/JPY for 1 month; this isolates the terms-of-trade channel and should outperform if energy remains bid while global risk sentiment stays mixed.
• Buy near-dated upside on crude-linked volatility but hedge with a quick take-profit plan; the geopolitical premium can expand fast but often decays abruptly, making options preferable to outright commodity longs.
• Avoid adding to EM local-currency duration in import-dependent markets until the energy shock is either clearly transitory or fully reflected in the FX move; the most fragile leg is the combination of higher dollar funding costs and wider import bills.