HSBC Euro To Dollar 2026 Forecast: EUR/USD Risks 1.10 On An Extended Iran War - Exchange Rates UK

What the desk is arguing

HSBC's 2026 EUR/USD forecast warns of a potential slide to 1.10 if the Iran conflict extends, highlighting a geopolitical tail risk that most consensus forecasts ignore. The base case among banks remains a gradual euro appreciation toward 1.22 by year-end, but HSBC's scenario underscores how quickly sentiment could shift if energy markets are disrupted.

The desk argues that an extended Iran war would likely trigger safe-haven USD flows, higher oil prices, and a drag on eurozone growth, all of which could push EUR/USD well below current levels. This is a reminder that geopolitical shocks remain a key source of downside for the euro versus the dollar.

Where it sits in our coverage

Our internal consensus shows a median Dec-26 EUR/USD target of 1.2200, with a range from 1.1600 (Morgan Stanley) to 1.2500 (Goldman Sachs, Deutsche Bank). HSBC's 1.10 scenario sits far below even the most bearish of our tracked forecasts, which places it squarely in tail-risk territory.

The consensus is firmly bullish on EUR/USD, with firms like JPMorgan (Dec-26: 1.2000), Goldman Sachs (1.2500), and Deutsche Bank (1.2500) all expecting the euro to gain. HSBC's 1.10 forecast is an outlier, but one that traders should be aware of as a potential shock scenario.

How other firms see it

Given that HSBC's 1.10 forecast is not a base case but a risk scenario, most firms remain aligned with a bullish EUR/USD outlook. Goldman Sachs targets 1.2500 by Dec-26, Deutsche Bank matches at 1.2500, and JPMorgan expects 1.2000. Even the most bearish of our tracked firms, Morgan Stanley, targets 1.1600, still well above 1.10.

The consensus is thus clearly contrary to HSBC's downside risk, but the novelty of HSBC's scenario lies in the specific geopolitical trigger. If an extended Iran war materializes, we would expect other firms to revise their forecasts sharply lower.