Pound to Dollar Forecast: Iran War Sends GBP to 11-Week Lows

Modified: Wednesday, 4 March 2026 18:46 BST - Written by David Woodsmith

STORY LINK Pound to Dollar Forecast: Iran War Sends GBP to 11-Week Lows

The Pound to Dollar exchange rate (GBP/USD) has dropped to 11-week lows below 1.3300 as escalating conflict involving Iran triggered a sharp deterioration in global risk appetite and a renewed surge in energy prices.

With oil and LNG costs jumping and investors flocking to safe-haven assets, the US dollar has strengthened broadly while Sterling faces additional pressure from the UK economy’s vulnerability to rising gas prices and slowing global growth.

GBP/USD Forecasts: 11-Week Lows

The Pound to Dollar (GBP/USD) exchange rate rallied from lows on Monday, but failed to hold the gains and was subjected to renewed selling on Tuesday with a slide to 11-week lows just below 1.3300.

The dollar was boosted by renewed defensive demand while the slide in risk appetite undermined the Pound.

According to UoB; “Looking ahead, if GBP breaks below 1.3315, the focus will shift to 1.3250.” There is the potential for further support on any dip to the 1.3200 area.

MUFG now sees a risk of a slide to below 1.31 this month on dollar strength before a solid recovery to 1.37 later in the year.

Energy-sector fears have intensified as Iran has attacked regional energy facilities and threatened to close the Straits of Hormuz. Oil prices have increased further while LNG prices have spiked again with close to a 100% increase from last week.

The UK economy remains vulnerable to higher gas prices and the Pound tends to remain under pressure when risk conditions slide.

ING noted the importance of energy prices; “FX traders will remain transfixed on gas and oil prices. The longer they stay elevated, the more the external accounts of the oil importers are damaged and the greater the drag on global growth from elevated inflation and curtailed monetary easing cycles.”

Scotiabank FX strategist Eric Theoret commented; "Today is, I would say, a classic risk-off day from a U.S. dollar perspective."

He added; "If you're looking to de-risk and de-risk in size, the U.S. Treasury market is really the only one that can handle those flows," Theoret said. When global investors flood into Treasuries during a crisis, that drives up demand for the dollar.”

According to Rabobank; “While USD has not been behaving as a safe-haven traditionally would, given the dramatic USD sell-off in H1 2025, we have long argued that this was more about positioning. Indeed, recent price action makes it clear that when the going gets rough, investors still flee to the warm embrace of greenback liquidity.

ING added; “Europe is also on the wrong side of the ledger. The dollar looks the best currency to take advantage of this energy shock.”

MUFG noted; “We have made the assumption that the bulk of the negative impact on European currencies will occur this month before fading as the year progresses. It follows comments from President Trump that US military action in Iran could last for four to five weeks or so.

It added; “A more protracted conflict and/or much greater disruption to global energy supply would further increase downside risks to our forecasts for weaker European currencies against the US dollar.”

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TAGS: Pound Dollar Forecasts