On the 40th day of the US–Iran conflict, the situation has finally shown signs of de-escalation. The two sides agreed to a two-week ceasefire, leading to a rapid cooling of risk-off sentiment in global financial markets. The US dollar weakened broadly, while the British pound rallied strongly, recording its largest single-day gain against the dollar in three weeks.
The pound rose by 1% against the US dollar, climbing to around $1.35 on April 8, its highest level since March 23. It now stands just 0.4% below the level seen before the conflict escalated in late February, indicating strong recovery momentum.
Meanwhile, Brent crude futures fell sharply by as much as 16% in early trading following the ceasefire news. The decline in energy prices has helped ease the UK’s import cost pressures. To further consolidate the ceasefire and safeguard energy supply routes, Downing Street announced on April 8 that Prime Minister Keir Starmer has traveled to the Middle East to hold talks with Gulf partners, aiming to ensure the Strait of Hormuz resumes normal operations.
The visit had reportedly been planned before the ceasefire announcement. Earlier that day, Starmer also expressed support for the agreement on social media, stating that it provides a much-needed breathing space. The UK will work with its allies to uphold the ceasefire and push for a more lasting agreement, ensuring the stability of this critical energy corridor.
Earlier this week, UK Foreign Secretary David Lammy held talks with US Secretary of State Marco Rubio, discussing diplomatic measures to reopen the Strait. These efforts build on the consensus reached at an international conference led by the UK last week. The UK’s proactive diplomatic actions have also contributed to stabilizing energy markets and supporting the pound.
The easing of tensions in the Middle East has reshaped the dynamics of the foreign exchange market since late February. The pound’s strong rebound reflects both reduced geopolitical risks and a gradual return toward pre-conflict levels.
With a stronger pound, easing energy pressures, and improving geopolitical stability, confidence in the UK market continues to recover.
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