Pound Slips as Middle East Tensions Weigh on Markets

2026-07-13 07:10 By Joana Ferreira 1 min. read

The pound fell back below $1.34, retreating from three-week highs, as investors reacted to rising Middle East tensions.

Oil prices surged following another wave of US strikes on Iran, with both sides clashing over the status of the Strait of Hormuz.

The US Central Command confirmed strikes on dozens of targets to curb Iran’s ability to threaten shipping in the region, while Iran declared the strait would remain closed "until further notice." The resulting uncertainty amplified inflation concerns, prompting investors to increase bets on further Bank of England interest rate hikes.

Markets now anticipate at least one rate increase later this year, with a possibility of a second.

Politically, Andy Burnham is set to become the new Labour party leader when the leadership contest ends on Friday and is expected to be officially appointed as prime minister next Monday.

Sterling’s resilience amid recent political turmoil suggests much of the negative news has already been factored in.



News Stream
Pound Slips as Middle East Tensions Weigh on Markets
The pound fell back below $1.34, retreating from three-week highs, as investors reacted to rising Middle East tensions. Oil prices surged following another wave of US strikes on Iran, with both sides clashing over the status of the Strait of Hormuz. The US Central Command confirmed strikes on dozens of targets to curb Iran’s ability to threaten shipping in the region, while Iran declared the strait would remain closed "until further notice." The resulting uncertainty amplified inflation concerns, prompting investors to increase bets on further Bank of England interest rate hikes. Markets now anticipate at least one rate increase later this year, with a possibility of a second. Politically, Andy Burnham is set to become the new Labour party leader when the leadership contest ends on Friday and is expected to be officially appointed as prime minister next Monday. Sterling’s resilience amid recent political turmoil suggests much of the negative news has already been factored in.
2026-07-13
Pound Strengthens as UK Awaits New PM
The pound climbed to $1.343, its highest since mid-June, and marking its second consecutive weekly increase against the dollar. This surge follows expectations that the Bank of England will raise interest rates later this year, with money markets pricing in at least one hike and a 25% chance of a second. Sterling has rebounded over 2% since hitting a seven-month low in late June, after Labour Prime Minister Keir Starmer announced his resignation. Andy Burnham is set to take over as party leader when the leadership contest concludes on Friday, July 17, and is expected to formally become prime minister on Monday, July 20. The pound’s rise also comes as Brent crude reached two-week highs this week due to renewed US-Iran hostilities, though peace negotiations are set to continue. With the UK more reliant on energy imports than many of its neighbors, its markets remain particularly sensitive to oil price fluctuations.
2026-07-10
Pound Climbs to Three-Week High on BoE Rate Hike Bets
The pound rose back above $1.34, its strongest level since mid-June, as investors increased bets on Bank of England interest rate hikes amid escalating tensions between the US and Iran. Investors also weighed the latest remarks by US President Donald Trump, who stated that Iran still wants to make a deal "badly." Crude prices reached two-week highs on Wednesday after fresh US strikes in Iran, with Trump declaring the Iran ceasefire over, raising doubts about the peace deal’s stability and heightening inflationary pressures. Investors now fully price in a 25-basis-point BoE rate hike by year-end, most likely in December. Politically, Andy Burnham, the frontrunner to succeed Keir Starmer as prime minister, has yet to name a finance minister, with former energy minister Ed Miliband emerging as the likely choice. Sterling’s resilience amid recent political turmoil suggests much of the negative news has already been priced in.
2026-07-09