GBP/USD Forecast: Safe-Haven Dollar Gains amid Fresh Israel-Iran Violence

Modified: Monday, 8 June 2026 20:01 BST - Written by David Woodsmith

STORY LINK GBP/USD Forecast: Safe-Haven Dollar Gains amid Fresh Israel-Iran Violence

The Pound US Dollar (GBP/USD) exchange rate touched a three-week low on Monday, as renewed violence in the Middle East triggered a cautious market mood.

At the time of writing, GBP/USD was trading at $1.3344, having recovered from a three-week low of $1.3306.

The US Dollar (USD) strengthened at the beginning of the week as renewed conflict in the Middle East drove investors towards safer assets.

Over the weekend, Iran carried out attacks on Israel in response to Israeli strikes on Lebanon, which Tehran argued breached the US-Iran ceasefire agreement.

Israel then launched its own retaliatory strikes, despite US President Donald Trump urging the country not to launch further attacks.

The fresh flare-up appeared to dent hopes for a lasting peace deal, weighing heavily on market sentiment and lifting demand for the safe-haven US Dollar.

However, markets stabilised later on Monday morning after Trump demanded that both Israel and Iran ‘immediately stop shooting’. Markets were cautiously hopeful that the US President could rein in Israel and prevent the recent escalation from spiralling out of control.

Meanwhile, the Pound (GBP) came under pressure as the increasingly risk-sensitive currency was hit by fading market confidence.

The latest escalation in the Middle East also pushed UK government bond yields higher, adding to the strain on GBP amid renewed concerns over Britain’s fiscal position.

Sterling faced further headwinds following comments from Bank of England (BoE) policymaker Alan Taylor, who suggested that borrowing costs may not need to rise further as interest rates are already ‘quite restrictive’.

However, the impact of Taylor’s remarks was limited, as he is widely viewed as one of the more dovish voices on the BoE’s Monetary Policy Committee.

Near-Term GBP/USD Forecast: Middle East Tensions to Drive Movement

Looking ahead, risk sentiment could remain the main driver of the Pound US Dollar exchange rate on Tuesday, with major UK and US data releases absent from the calendar.

As a result, GBP/USD may extend its losses if further strikes in the Middle East fuel fears that the conflict is escalating.

On the other hand, any signs that the latest bout of violence is easing – or that diplomatic efforts are gaining traction – could revive risk appetite.

This may weigh on the safe-haven US Dollar, allowing the Pound to regain some ground.

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TAGS: Pound Dollar Forecasts