EUR/USD traders may have overreacted to the recent energy shock, which pales in comparison to the surge during the war in Ukraine, when gas prices rose by 277 euros ($326.42) versus a 37-euro increase during the current Middle East conflict.

In 2022, EUR/USD slumped from around 1.15 toward 0.95 as a $9 billion net-long bet flipped to a $5 billion net-short position.

In 2026, EUR/USD fell from about 1.18 toward 1.14 as traders unwound a $27 billion long position and built a $1 billion short.

EUR/USD has since recovered the ground lost during the conflict and gas is roughly 12 euros more expensive than it was before the war.

While some additional inflation is still in the pipeline, there is significant upside potential for the euro, especially now that it has been freed from the heavy burden of prior bullish positioning.
EURUSD gas prices and euro betting


(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)