Oil Market Swings Keep Dollar and Pound Sterling on Edge

Modified: Thursday, 12 March 2026 18:31 BST - Written by Frank Davies

STORY LINK Oil Market Swings Keep Dollar and Pound Sterling on Edge

The Pound US Dollar (GBP/USD) exchange rate moved unevenly on Thursday as the escalating crisis in the Middle East continued to inject volatility into global markets.

At the time of writing, GBP/USD was trading at $1.3375, having fluctuated throughout the session as shifting risk sentiment influenced the currency pair.

The US Dollar moved unevenly as fluctuating market sentiment continued to influence demand for the safe-haven currency.

In recent sessions, USD has experienced sharp advances and pullbacks as investors react to the evolving situation in the Middle East.

US President Donald Trump has attempted to downplay the lasting consequences of the joint US and Israeli strikes on Iran, suggesting the conflict could conclude ‘very soon’. Despite this optimism, hostilities in the region have continued to intensify.

Oil markets have also been highly volatile amid the uncertainty. Strikes on energy infrastructure by both sides have driven prices higher, although measures aimed at calming the market have limited the scale of the surge.

The International Energy Agency has stated that its member states stand ready to release strategic oil reserves to ease supply fears and stop prices from rising too sharply.

Although this announcement has helped rein in the most dramatic gains in crude prices, investors remain wary. Ongoing concerns about potential disruptions to global energy supplies mean shifts in risk sentiment and demand for the safe-haven ‘Greenback’ could remain a key market theme.

Meanwhile, the Pound traded without clear direction as the ongoing spike in energy prices complicated the outlook for UK monetary policy.

Higher oil and gas prices create a difficult backdrop for Sterling. For energy-importing economies like the UK, rising costs effectively act as an additional burden, squeezing household finances and raising concerns about slower economic growth.

At the same time, the inflationary pressure created by higher energy prices could encourage the Bank of England to keep interest rates higher for longer than previously anticipated. Elevated borrowing costs can provide some support for the Pound by boosting its yield appeal.

This push and pull between economic headwinds and shifting interest rate expectations left Sterling largely rangebound, with GBP investors closely watching developments in the energy market and the escalating tensions in the Middle East.

Short-Term GBP/USD Forecast: Key UK and US Data in Focus

The UK’s latest GDP release will be the primary focus for GBP investors. Economists expect growth to have picked up from 0.1% in December to 0.2% in January, which could offer the Pound some modest support. However, Sterling could see sharper movement if the figures diverge significantly from expectations.

For the US Dollar, the highlight will be January’s core PCE price index, the Federal Reserve’s preferred gauge of inflation. If the data indicates that underlying price pressures strengthened at the beginning of 2026, USD may gain ground.

The ‘Greenback’ could also benefit from forecasts pointing to a 1.2% rebound in durable goods orders for January, alongside an increase in job openings. That said, any improvement in USD may be tempered if consumer sentiment weakens as expected.

Alongside the data, investors will continue to monitor developments in the Middle East. Any escalation or new developments in the conflict could drive swings in market sentiment and inject fresh volatility into the Pound US Dollar exchange rate.

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TAGS: Pound Dollar Forecasts