Rising Oil Prices Push the Yen Lower for a Third Straight Session

The yen extended its losses on Thursday, marking a third straight session of weakness as rising oil prices and renewed geopolitical tension kept pressure on Japan’s outlook. USDJPY is trading near 159.45, with the pair holding close to recent highs as investors continue to favour the U.S. dollar over the yen in an environment shaped by energy risk and cautious market sentiment.

A major reason for the yen’s weakness is oil. Japan remains heavily dependent on imported energy, which means higher crude prices can quickly feed into the economy through rising import costs, a weaker trade balance, and more pressure on growth. That makes the yen especially vulnerable when oil rebounds. Even though Japan recently received two oil tankers that bypassed the Strait of Hormuz, offering some temporary relief, the broader supply picture still looks uncertain. As long as oil prices stay firm, that pressure is unlikely to disappear.

The geopolitical backdrop is adding to the strain. Markets have received mixed signals around diplomacy in the Middle East, but there is still little sign of a clear breakthrough. The U.S. has said negotiations are ongoing, while Iran has rejected direct talks and proposed its own conditions, including control over the Strait of Hormuz. That has reduced confidence in a near-term resolution and kept risk sentiment cautious. In this kind of environment, the U.S. dollar continues to attract safe-haven demand, while the yen struggles to recover in a meaningful way.

There is also a policy layer that markets are watching closely. Discussions in Japan around the possibility of deploying warships to help secure major shipping routes underline how serious the situation has become for energy-importing economies. At the same time, currency traders remain highly alert to the risk of official intervention if USDJPY moves too close to the 160 level. That area has previously drawn stronger attention from Japanese authorities, which means the pair may remain sensitive to both policy signals and any faster move higher.

Against this backdrop, the yen remains caught between rising energy costs, geopolitical uncertainty, and a strong dollar. As long as those forces stay in place, the path of least resistance may continue to favour USDJPY on the upside, even if intervention risk becomes more prominent near 160.

Read more on how oil prices, Middle East tensions, and intervention risk that could shape USDJPY next move.