Sterling Weakens Amid US-Iran Crisis

The British pound traded at $1.341, slipping from last week’s one-month high of $1.348, after US-Iran negotiations collapsed over the weekend. The breakdown followed Iran’s refusal to renounce nuclear ambitions and what Tehran called “excessive” US demands. Escalating tensions, US President Donald Trump threatened to blockade the Strait of Hormuz, a critical oil chokepoint, sending Brent crude soaring to around $102 per barrel. The spike in oil prices has deepened a global energy crisis, raising fears of an inflation shock and prompting markets to brace for a more hawkish Bank of England. Traders have raised their expectations to nearly two interest rate hikes by the end of 2026, an increase from just one anticipated last week.

The British pound edged above $1.34, marking its strongest level since late February and on track for a nearly 1.5% weekly gain against the dollar, supported by optimism over a potential Russia-Ukraine peace deal and a cautious stance ahead of US-Iran ceasefire talks this weekend. Ukraine’s lead negotiator hinted at progress in talks with Russia, raising hopes for a swift end to Europe’s bloodiest conflict since World War II. Meanwhile, US-Iran negotiations are set for Saturday, though tensions remain high as Tehran maintains its Strait of Hormuz blockade, the worst energy disruption in history. President Trump balanced optimism with warnings over Iran’s new shipping fees. On the monetary front, rising oil prices stoked inflation fears, leading markets to price in a more hawkish Bank of England, with traders now expecting at least one BoE rate hike by end-2026.

The British pound traded just above $1.34, reaching its strongest level since late February and heading for a near 1.5% weekly gain against the US dollar, as market attention remained fixed on the fragile US-Iran ceasefire and the high-stakes negotiations set for Pakistan this weekend. Tehran maintained its near-total blockade of the Strait of Hormuz, causing the worst disruption to global energy supplies in history while insisting on Lebanon’s inclusion in peace talks. Meanwhile, US President Trump struck a mixed tone, expressing optimism about a potential deal but later warning Iran over new fees imposed on ships passing through the critical waterway. On the monetary policy front, rising oil prices reignited inflation concerns, prompting markets to price in a more hawkish Bank of England, with traders now anticipating at least one BoE rate hike by the end of 2026.