Pound Sterling to Dollar Forecast: GBP Recovers as Trump Eases Iran War Fears

Modified: Tuesday, 10 March 2026 13:01 BST - Written by David Woodsmith

STORY LINK Pound Sterling to Dollar Forecast: GBP Recovers as Trump Eases Iran War Fears

The Pound to Dollar exchange rate (GBP/USD) slipped back toward three-month lows as a sharp surge in global oil prices triggered a broad risk-off move across financial markets.

After briefly strengthening following weak US jobs data, Sterling retreated toward 1.3280 before stabilising near 1.3340, with investors shifting into defensive dollar positions as fears over supply disruptions in the Strait of Hormuz pushed crude prices sharply higher and rattled global equities.

GBP/USD Forecasts: Near 3-Month Low

The surge in energy prices has dominated currency markets on Monday, especially with major implications for the UK and global economy. Fear has undermined the Pound while there has been defensive dollar demand.

After strengthening on Friday after weaker than expected US jobs data, the Pound to Dollar (GBP/USD) exchange rate dipped to lows near 1.3280 and close to 3-month lows before edging back above 1.3300 to trade around 1.3340.

According to UoB; “the likelihood for GBP to retest 1.3250 remains intact.”

Disruption to crude oil flows through the Straits of Hormuz, combined with attacks on regional infrastructure, has triggered increased fears over global oil supplies.

Brent crude spiked over 20% at one stage in Asian trading to 44-month highs near $115 p/b before a limited correction and is trading around 14% higher around $104. Risk appetite has dipped sharply with the FTSE 100 index at 6-week lows.

Forecasts of Bank of England (BoE) rate cuts have also been ripped up with fears that the central bank might have to raise rates to combat inflation.

UK and global bond markets will also be a key market element amid the surge in oil prices.

The UK 10-year bond yield has jumped to a 5-month high above 4.70%.

A further increase in yields would further undermine economic activity and trigger fresh fears over the UK budget position, increasing the potential threat to the Pound.

Bob Savage, head of markets macro strategy at BNY Mellon commented; "Oil remains the transmission channel into inflation expectations, rates and currency markets, with the dollar’s resurgence echoing the 2022 energy crisis. The week ahead will test whether markets continue to treat the current conflict as a contained shock or begin to price a more durable supply disruption."

ING noted that conditions could deteriorate further; “A much bigger unwind remains the risk for global equity markets as higher energy prices dampen growth prospects, while higher longer-dated interest rates sap the net present value earnings of the growth stocks.”

On currency markets it commented; “Short dollar positioning also means that in extreme bouts of deleveraging – like what we saw last Tuesday and could perhaps see again today – the dollar is again the beneficiary.”

MUFG discussed developments within Iran; “Iran’s decision to choose Mojtaba Khamenei, the hard-line son of recently deceased Ayatollah Ali Khamenei, to be the new supreme leader has signalled that Iran is not ready to back down in the conflict.”

On Friday, the US released a weaker than expected jobs report with non-farm payrolls reported as declining 92,000 for February from a revised 126,000 gain the previous month and compared with consensus forecasts of an increase around 60,000. The unemployment rate also ticked higher to 4.4% from 4.3%.

MUFG commented; “The combination of still weak US labour market and energy price shock is putting the Fed in an even more difficult position when setting policy.”

It added; “So far the US rate market has moved to push back both the timing and scale of further Fed rate cuts lifting US rates and the US dollar.”

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TAGS: Pound Dollar Forecasts