Pound to Dollar Forecast: Oil Price Surge Drives USD Strength, GBP Weakness

Published: Tuesday, 31 March 2026 11:00 BST - Written by Tim Boyer

STORY LINK Pound to Dollar Forecast: Oil Price Surge Drives USD Strength, GBP Weakness

The Pound to Dollar exchange rate (GBP/USD) has slipped toward 1.3230, hovering close to three-month lows, as rising energy prices and escalating Middle East tensions continue to favour the US dollar.

With geopolitical risks underpinning safe-haven demand and markets bracing for key US labour data, Sterling remains vulnerable to further downside in the near term.

GBP/USD Forecasts: Near 3-Month Lows

The dollar secured net gains on Friday and has secured a further net gain on Monday with the currency index close to 10-month highs amid further concerns over Middle East developments.

The Pound to Dollar (GBP/USD) exchange rate has dipped to near 1.3230 and very close to 3-month lows of 1.3220 recorded earlier in March.

According to UoB; “Downward momentum is building rapidly, and from here, GBP is likely to break 1.3220 and head toward 1.3160.”

Bank of America is now backing GBP/USD losses to 1.30.

Energy prices have increased further, increasing fears over the economic impact, although equity markets have held firm with the FTSE 100 index securing a small net gain. The 10-year yield retreated to 4.88% which provided a small element of relief.

According to ING; “Barring any clear, conciliatory messages from the Iranian side, it is hard to see the dollar handing back this month's gains anytime soon.”

MUFG commented; “Developments over the weekend have triggered renewed investor concerns over a broader and prolonged conflict in the Middle East that would be more disruptive for global energy supplies.”

Iran-backed Houthi rebels in Yemen launched missile and drone attacks on Israel.

MUFG commented; “It has created fresh concerns that they could also disrupt or block the Bab el-Mandeb Strait which is a strategic choke point at the southern end of the Red Sea.”

President Trump also warned over a potential move to attack and take Kharg Island, the main Iranian oil export hub.

MUFG added; “Without a timely deal to end the conflict and re-open the Strait of Hormuz, risks remain tilted to the upside for energy prices as global supply shortages bite. It should favour further US dollar upside as well although it has failed to advance further in recent weeks which is perhaps an indication that a higher US policy risk premium has also been priced in.”

US data will also be watched closely this week with a particular focus on the employment report on Friday.

Consensus forecasts are for an increase in non-farm payrolls of around 55,000 with the unemployment rate holding at 4.4%.

BNY head of markets macro strategy Bob Savage commented; "In the eye of the storm, this week delivers a crucial run of U.S. labour market data. Given the weak February jobs report and a month of conflict in the Middle East, we’re keen to learn how the jobs situation has responded.”

ING commented; “Any surprise weakness could hit the dollar.”

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TAGS: Pound Dollar Forecasts