GBP to USD Forecast: Pound Sterling Falls as Middle East Tensions Escalate

Modified: Monday, 20 April 2026 20:31 BST - Written by David Woodsmith

STORY LINK GBP to USD Forecast: Pound Sterling Falls as Middle East Tensions Escalate

The Pound US Dollar (GBP/USD) exchange rate opened the week on the back foot as tensions in the Middle East intensified once again.

At the time of writing, GBP/USD was trading at approximately $1.3497, down almost 0.2% from Monday’s opening levels.

The US dollar (USD) began the week on firm footing, with demand for the safe-haven currency lifted by renewed geopolitical uncertainty.

After signalling the Strait of Hormuz would remain open on Friday, Iran reversed course over the weekend, closing the vital shipping route as US naval forces continued their blockade.

An attempt by an Iranian-flagged vessel to break through the blockade on Monday led to its seizure, further escalating tensions between Washington and Tehran.

Iranian state media has since threatened retaliation and confirmed the country has ‘no plans to participate’ in further negotiations with the US.

This has raised doubts over the current ceasefire, which is set to expire on Wednesday.

The pound (GBP) came under pressure as escalating tensions triggered another rise in UK government bond yields.

The increase in borrowing costs reignited concerns about the UK’s fiscal outlook, particularly regarding how the government might finance additional energy support for households later this year.

Further undermining Sterling was data showing UK consumer confidence has dropped to a 33-month low since the onset of the US-Iran conflict, amid worries over inflation and the jobs market.

Short-Term GBP/USD Forecast: UK Labour Data in Focus

The Pound to US dollar (GBP/USD) exchange rate may remain under pressure ahead of the release of the UK’s latest labour market figures.

In addition to unemployment holding at a five-year high, February’s data is expected to show slower wage growth and a decline in employment levels.

Fresh evidence of a cooling labour market could further dampen Bank of England rate hike expectations and weigh on Sterling in early trade.

Meanwhile, although the US dollar will likely continue to track geopolitical developments, the latest US retail sales figures may provide additional support if they indicate a pickup in consumer spending last month.

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TAGS: Pound Dollar Forecasts