GBP/USD Forecast: Pound Sterling Dips After US-Israel Strikes on Iran

Modified: Tuesday, 3 March 2026 07:46 BST - Written by Frank Davies

STORY LINK GBP/USD Forecast: Pound Sterling Dips After US-Israel Strikes on Iran

The Pound US Dollar (GBP/USD) exchange rate tumbled on Monday, striking its weakest level since mid-December as escalating violence in the Middle East sparked a rush into safe-haven assets.

At the time of writing, GBP/USD was trading at $1.3406, down around 0.5% on the day, having recovered from an earlier trough of $1.3327.

The US Dollar rallied sharply at the start of the week after fresh military action in the Middle East rattled global markets. Over the weekend, US and Israeli forces carried out coordinated strikes on Iran, resulting in the death of Iran’s Supreme Leader Ayatollah Ali Khamenei.

Tehran responded swiftly, with Iran and affiliated militant groups launching retaliatory attacks against US military bases and key American allies across the region.

As trading resumed on Monday, investors sought the relative security of the ‘Greenback’, prompting a broad-based surge in the US Dollar as risk appetite deteriorated.

The increasingly risk-sensitive Pound came under pressure as investors recoiled from riskier assets in response to escalating geopolitical tensions. With market sentiment deteriorating, Sterling’s risk-linked profile left it exposed to the shifting mood.

Although the Pound clawed back some ground against the US Dollar later in the session, it remained well below its opening levels for the week.

In the absence of any notable UK economic releases, GBP lacked a clear domestic catalyst, leaving it vulnerable to the US Dollar’s safe-haven-driven advance.

Short-Term GBP/USD Forecast: Spring Statement and Geopolitics in Focus

The Pound may look to Chancellor Rachel Reeves’s Spring Statement for fresh direction, alongside updated projections from the Office for Budget Responsibility. Major policy shifts are not anticipated, but any upgrade to growth or fiscal forecasts could lend Sterling some modest support.

Developments in the Middle East are also likely to remain central to market sentiment. Should tensions intensify further, a defensive stance may persist, a dynamic that tends to favour the safe-haven US Dollar while leaving the more risk-sensitive Pound under pressure.

There is, however, a potential counterbalance for GBP. If climbing oil prices prompt investors to reconsider the timing of future Bank of England interest rate cuts, particularly if higher energy costs threaten to stoke UK inflation, Sterling could find some underlying support despite the uneasy backdrop.

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TAGS: Pound Dollar Forecasts