FX.co ★ Pound Near Four-Month Low on Iran Tensions

The British pound hovered around $1.32, near its lowest level since late November, as market sentiment was dampened by uncertainty over the Iran conflict and surging oil prices. At the same time, the dollar remained firm, supported by stronger-than-expected US employment data last week, which further reduced expectations of imminent Federal Reserve rate cuts. US President Trump warned Iran of severe consequences if it failed to reopen the Strait of Hormuz by Tuesday, although US intelligence reportedly sees little chance that Tehran will comply. In parallel, reports point to negotiations on a 45-day truce involving the US, Iran, and regional mediators, which could help ease tensions. With crude prices hovering near multi-year highs, mounting inflation concerns have led investors to largely price out Fed rate cuts this year. In the UK, markets now anticipate two Bank of England rate increases in 2026, a sharp reversal from pre-war expectations of two cuts, despite Governor Andrew Bailey’s warning that investors may be overestimating the scale of future tightening.