2026.05.2607:38:36UTC+00Pound Retreats as US-Iran Tensions Weigh

The pound slipped to $1.347 as escalating US–Iran tensions reignited inflation worries and darkened the global growth outlook. On Monday, Iran reported explosions in the southern port city of Bandar Abbas, while the US confirmed it had carried out “self-defense” strikes against Iranian missile launch sites and vessels allegedly attempting to deploy naval mines. Earlier in the day, US President Donald Trump said a memorandum of understanding between the two countries was “largely negotiated” and would enable the reopening of the strategically vital Strait of Hormuz shipping lane.

In the UK, data showed a contraction in private-sector activity in May, alongside easing inflation and a softening labour market. This prompted investors to scale back expectations for further Bank of England interest-rate hikes. Market attention now turns to upcoming speeches by BoE policymakers for clearer guidance on the policy outlook, as well as to political developments facing Prime Minister Keir Starmer following Labour’s regional election setbacks earlier this month.