2026.03.3108:45:12UTC+00Sterling Suffers 2% Monthly Drop on Middle East Crisis

The British pound finished March just above $1.32, hovering near its weakest level since early December after a tumultuous month dominated by escalating tensions in the Middle East. Sterling fell about 2% against the dollar as traders assessed the potential economic fallout from the worsening crisis. Uncertainty deepened after a Wall Street Journal report indicated that US President Donald Trump was weighing an end to the military campaign against Iran, even if the Strait of Hormuz remained blocked. This shifting geopolitical backdrop prompted a sharp reassessment of Bank of England policy expectations: markets now foresee at least two rate hikes in 2026, with roughly a 50% probability of an increase as early as April, a dramatic reversal from earlier forecasts that had priced in two cuts. Still, BoE policymaker Alan Taylor adopted a cautious stance last week, setting a “high bar” for any rate rise and arguing for steady borrowing costs until the economic consequences of the conflict become clearer.