GBP/USD Forecast: Safe-Haven Demand Supports Dollar amid US-Iran Conflict

Modified: Monday, 13 July 2026 22:16 BST - Written by David Woodsmith

STORY LINK GBP/USD Forecast: Safe-Haven Demand Supports Dollar amid US-Iran Conflict

The Pound to US Dollar (GBP/USD) exchange rate slipped at the beginning of Monday's session as renewed fighting in the Middle East encouraged demand for the safe-haven US Dollar (USD), although Sterling later recovered part of its initial decline.

At the time of writing, GBP/USD was trading at $1.3388 after rebounding from an overnight low of $1.3369.

The US Dollar edged higher at the start of the week after fresh hostilities erupted in the Middle East.

While the fighting eased temporarily on Friday, tensions reignited over the weekend when Iran attacked a container ship in the Strait of Hormuz. The US answered with strikes on Iranian targets, triggering retaliatory attacks by Tehran against US-backed Gulf states.

Growing concern that the conflict could intensify has weakened expectations that the two sides will be able to reach a durable peace agreement.

The cautious tone at the start of Monday's session provided support for the safe-haven US Dollar. However, the 'Greenback' was unable to maintain its early advance as broader risk appetite proved more resilient than initially expected.

The Pound (GBP) lacked clear momentum on Monday as a quiet UK economic calendar left Sterling without a strong catalyst.

Even so, the currency avoided heavier losses against the US Dollar, with confidence in the UK's political outlook continuing to provide support. Investors remained optimistic that the lengthy period of political uncertainty that has pressured the Pound was starting to ease.

As a result, GBP recovered a portion of its earlier losses against USD.

Near-Term GBP/USD Forecast: Will US Inflation Weigh on the US Dollar?

Looking ahead, the US Dollar could come under pressure on Tuesday when the latest US consumer price index is released.

Economists expect inflation to have eased from 4.2% in May to 3.8% in June. A reading in line with forecasts may reduce support for USD.

That said, developments in the Middle East are also expected to influence price action. If geopolitical tensions remain elevated, the safe-haven appeal of the 'Greenback' could strengthen.

Meanwhile, GBP investors will be watching a speech from Bank of England (BoE) Governor Andrew Bailey.

Bailey has continued to strike a cautious tone in recent weeks, arguing that policymakers should assess inflation carefully before adjusting interest rates. However, with renewed US-Iran tensions driving energy prices higher, Sterling could find support if his comments reinforce expectations that UK monetary policy will remain restrictive.

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TAGS: Pound Dollar Forecasts