Sterling fell against the US Dollar during the North American session after US President Donald Trump said the conflict with Iran could last two to three weeks. GBP/USD was at 1.32144, down 0.40%.
Trump said the mission in Iran would finish fast and warned of strikes on energy plants and oil facilities if there is no deal. The US Dollar rose, global equities fell, and crude prices moved higher.
Pound Under Pressure
GBP/USD dropped to a two-day low of 1.3181 before moving back above 1.3200. A report via IRNA said Iran is drafting a protocol with Oman for Strait of Hormuz traffic, which helped the pair recover part of the move.
US data was mixed: Challenger job cuts were 60,620 in March, more than 24% higher than 2025 figures. Initial Jobless Claims for the week ending March 28 were 202,000, below 212,000 expected and down from 215,000.
Dallas Fed President Lorie Logan said policy is well positioned for uncertainty and rates may be adjusted as appropriate. UK and US markets are closed on Friday for Good Friday; US Nonfarm Payrolls are expected at 60,000 after -92,000, with unemployment seen at 4.4%.
On the chart, GBP/USD traded near 1.3240. Resistance is at 1.3350 and 1.3480, while support is at 1.3220 and 1.3035, with 1.2900 below.
Given the escalation in Middle East tensions, we are seeing a classic flight to safety into the US Dollar. The Dollar Index (DXY) is pushing towards 106.00, its highest level in months, as global uncertainty drives capital into US assets. This environment makes it challenging for currencies like the British Pound, which is sensitive to global risk sentiment.
For derivative traders, this means we should expect a sharp increase in market volatility over the coming weeks. The CBOE Volatility Index (VIX), a key measure of fear, has already jumped over 20, a level we have not consistently seen since the banking turmoil of 2023. This suggests that options pricing will become more expensive, reflecting the heightened risk of sudden price swings.
Energy And Volatility
The direct threats to energy facilities are causing crude oil to surge, with Brent crude now trading above $105 per barrel. This is reminiscent of the price spikes we saw in 2022, and it complicates the outlook for inflation and central bank policy globally. Traders should be positioned for sustained high energy prices, which will continue to weigh on energy-importing economies like the UK.
In the options market, we are seeing a significant bid for downside protection on the pound. One-month risk reversals for GBP/USD now show the heaviest bias for puts in over a year, indicating that traders are actively hedging against a further fall. This makes selling call options on GBP/USD, or buying puts outright, an increasingly common strategy to profit from or protect against further weakness.
The technical picture supports this bearish view, as the pair’s failure to hold above the 1.3480 moving averages is a clear signal of weakness. We must now watch the 1.3220 support level very closely, as a decisive break below it would target the 1.3035 level next. Historical price action shows that once major psychological levels like 1.3000 are in play, downward momentum can accelerate quickly.
While we have the US Nonfarm Payrolls report tomorrow, its market impact may be muted by the geopolitical overhang. Even if the expected 60,000 print is beaten, it may only provide a temporary lift for GBP/USD before the stronger dollar trend reasserts itself, especially with job cuts reportedly running 24% higher than figures from 2025. The primary driver for the next two to three weeks will be headlines from the Middle East, not economic data.
