Central and Eastern European (CEE) markets are described as highly exposed to the US–Iran conflict and rising oil prices, with geopolitics expected to outweigh scheduled local data from Hungary, Turkey and Poland. Following a sharp sell-off in rates on Friday, regional currencies are expected to face renewed pressure, with attention on EUR/HUF and the unwinding of long HUF positions. Hungary is due to publish February inflation on Tuesday, expected at 1.5% year-on-year, which would be the lowest level this year and below both market and National Bank of Hungary expectations. Turkey’s central bank meets on Thursday, with higher-than-expected inflation and geopolitical risks pointing to a pause in its easing cycle at 37%.

Oil Driven Volatility In CEE

Poland is set to release February inflation on Friday, expected to be unchanged at 2.2% year-on-year. CEE assets are presented as sensitive to higher energy costs, with oil-price moves feeding into inflation concerns and currency performance, especially for the forint. We saw this exact scenario play out in early 2025, when tensions in the Middle East drove a significant sell-off in regional rates and currencies. The Hungarian forint was under the most pressure as rising oil prices forced a rapid unwind of what was then a very crowded long position. This memory should guide our actions today as similar pressures are re-emerging. With Brent crude futures having climbed back over $95 a barrel in the last two weeks, we are seeing history repeat itself. February’s inflation figures from Hungary just last week showed an unexpected acceleration to 4.1%, highlighting how vulnerable the economy is to energy shocks. This renewed price pressure will almost certainly halt any further rate cuts from the National Bank of Hungary. For derivative traders, this is a clear signal to hedge against or speculate on further forint weakness. Buying EUR/HUF call options with one- to two-month expiries is a direct way to position for a move higher in the currency pair. Implied volatility in the forint has already jumped by 20% since late February, indicating the market is bracing for significant swings. We must also watch Poland, which released inflation data showing a stubborn hold above 3.5% last month. While the zloty is generally considered more resilient than the forint, it is not immune to regional sentiment driven by energy costs. A relative value trade, being long the Polish zloty against the Hungarian forint (long PLN/HUF), could offer a way to isolate the differing vulnerabilities within the CEE region.

Geopolitics Over Local Data

Ultimately, we have to put the local economic calendars aside for now. The primary driver for CEE assets in the coming weeks will be the price of oil and its impact on inflation expectations. Our attention should be focused on global geopolitical developments, as they will continue to dominate regional market performance. Create your live VT Markets account and start trading now.

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