GBP/USD Forecast: Pound Sterling Slides as Middle East Tensions Escalate

Modified: Monday, 23 March 2026 21:16 BST - Written by Tim Boyer

STORY LINK GBP/USD Forecast: Pound Sterling Slides as Middle East Tensions Escalate

The Pound to US Dollar (GBP/USD) exchange rate came under notable pressure on Monday as investors reacted to renewed geopolitical tensions in the Middle East.

At the time of writing, GBP/USD was trading near $1.3263, down roughly 0.6% compared to the start of the session.

The US Dollar rallied sharply at the beginning of the week, benefiting from a flight to safety as geopolitical risks escalated.

Investor sentiment deteriorated after US President Donald Trump delivered a firm warning to Iran, calling for the reopening of the Strait of Hormuz within a tight timeframe or risking direct military action against strategic targets.

Iran responded with its own threats, signalling that any US intervention would be met with significant retaliation, including potential disruption to vital infrastructure and shipping routes across the Persian Gulf.

This exchange heightened fears of a broader conflict, with markets increasingly concerned about the implications for global energy supply and the risk of a prolonged disruption to oil shipments through the region.

As a result, demand for the safe-haven US Dollar increased markedly.

Despite its losses against the US Dollar, the Pound held firmer against several other currencies, supported by expectations that the Bank of England may need to raise interest rates further.

With the UK facing growing inflationary pressures linked to rising energy costs, investors are now pricing in the possibility of multiple rate increases over the course of the year.

Short-Term GBP/USD Forecast: UK PMIs in Focus

Developments in the Middle East will remain a key driver of the Pound to US Dollar exchange rate, but upcoming UK economic data could also influence direction.

The release of the latest preliminary PMI figures is expected to provide an early indication of how the UK economy is coping amid the current geopolitical backdrop.

If the services sector continues to show resilience, it could offer some support to Sterling. However, any signs of weakness may leave the currency vulnerable to further losses.

At the same time, any escalation in tensions, particularly if the US follows through on its threats against Iranian energy infrastructure, could reinforce demand for the US Dollar as investors seek safer assets.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Dollar Forecasts