The British Pound continues to weaken against a strengthening US Dollar as tensions in the Middle East escalate.

• GBP/USD has come under selling pressure for a third consecutive session as renewed tensions between the US and Iran continue to support demand for the US Dollar.
• Higher oil prices are stoking inflation concerns and reducing expectations for Federal Reserve rate cuts, further strengthening the greenback. Meanwhile, the Bank of England’s relatively hawkish stance may provide some support to the pound, helping to cap deeper losses in the pair.

GBP/USD is extending its decline for a third consecutive day on Tuesday, though selling pressure remains limited as the pair holds above the key 1.3500 level during the Asian session. The mixed fundamental landscape suggests traders should be cautious about expecting a deeper pullback from last Friday’s peak around 1.3655–1.3660, the highest level since mid-February.

The US Dollar continues to benefit from safe-haven demand amid rising tensions between the US and Iran around the Strait of Hormuz, alongside reduced expectations for Federal Reserve rate cuts in 2026. This stronger USD is weighing on GBP/USD. However, the Bank of England’s comparatively hawkish stance offers support to the British Pound, helping to cushion further downside.

Recent developments have heightened geopolitical risks, including reports of an explosion on a South Korean-flagged vessel in the strait. Former US President Donald Trump warned of severe retaliation if Iran targets US ships, while Iran reportedly launched missile and drone attacks on the UAE following the US announcement of “Project Freedom” to assist stranded vessels.

These escalating tensions are pushing crude oil prices higher, stoking inflation concerns and reinforcing expectations of tighter monetary policy from major central banks, including the Fed. This dynamic continues to support the USD and pressure GBP/USD, although the BoE’s indication that further rate hikes may be needed if inflation persists should help stabilize the pair.

Looking ahead, traders will monitor Tuesday’s US data releases—including ISM Services PMI, JOLTS job openings, and new home sales—along with comments from FOMC officials for short-term direction. Still, attention is firmly on Friday’s Nonfarm Payrolls report and ongoing geopolitical developments, both of which are likely to drive market volatility.