Sterling Suffers 2% Monthly Drop on Middle East Crisis

2026-03-31 08:45 By Joana Ferreira 1 min. read

The British pound ended March just above $1.32, hovering near its lowest level since early December after a turbulent month dominated by escalating Middle East tensions.

Sterling lost around 2% against the dollar as traders weighed the economic fallout from the deepening crisis.

Adding to the uncertainty, a Wall Street Journal report revealed that US President Donald Trump was considering ending the military campaign against Iran, even if the Strait of Hormuz remained blocked.

The shifting geopolitical landscape triggered a sharp repricing of Bank of England policy expectations: markets now anticipate at least two rate hikes in 2026, with a 50% chance of a move as soon as April, a stark reversal from earlier bets on two cuts.

However, BoE policymaker Alan Taylor struck a cautious note last week, setting a "high bar" for rate increases and advocating for steady borrowing costs until the conflict’s economic impact becomes clearer.



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Sterling Suffers 2% Monthly Drop on Middle East Crisis
The British pound ended March just above $1.32, hovering near its lowest level since early December after a turbulent month dominated by escalating Middle East tensions. Sterling lost around 2% against the dollar as traders weighed the economic fallout from the deepening crisis. Adding to the uncertainty, a Wall Street Journal report revealed that US President Donald Trump was considering ending the military campaign against Iran, even if the Strait of Hormuz remained blocked. The shifting geopolitical landscape triggered a sharp repricing of Bank of England policy expectations: markets now anticipate at least two rate hikes in 2026, with a 50% chance of a move as soon as April, a stark reversal from earlier bets on two cuts. However, BoE policymaker Alan Taylor struck a cautious note last week, setting a "high bar" for rate increases and advocating for steady borrowing costs until the conflict’s economic impact becomes clearer.
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The British pound drifted toward $1.32, lingering near its lowest since early December and on track for a monthly decline of over 1% against the US dollar. Risk aversion dominated markets as traders assessed the economic risks from the protracted Middle East conflict, with reports of US troop preparations for a potential ground operation overshadowing Washington’s claims of progress in Iran negotiations. Meanwhile, Bank of England policy expectations underwent a dramatic shift: markets now anticipate at least two rate hikes in 2026, with a possible third, reversing earlier bets on two cuts. Meanwhile, BoE policymaker Alan Taylor struck a cautious tone last week. He emphasized a "high bar" for rate increases, advocating to hold borrowing costs steady until the economic impact of the Iran conflict becomes clearer.
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