FX.co ★ Sterling Dips Amid Middle East Uncertainty

The British pound fell toward $1.34, its weakest level since May 19, as escalating tensions in the Middle East dimmed hopes for a swift reopening of the Strait of Hormuz and intensified concerns about the UK’s economic outlook. Iran’s Tasnim News Agency reported that Tehran would suspend talks with the United States over Israeli strikes on Lebanon and move to completely close the Strait of Hormuz, accusing Washington of having “violated the ceasefire on all fronts.” The resulting surge in oil prices prompted investors to raise expectations for further Bank of England tightening, with markets now pricing in two interest rate increases in 2026. On the domestic front, UK house prices fell 0.6% in May, a steeper decline than the 0.1% forecast and the largest monthly drop since June 2025. Nationwide attributed the fall to waning consumer confidence and mounting economic pressure from higher energy costs linked to the Iran-related conflict.