Pound falls to 3-week low of $1.3306 as Iran-Israel strikes escalate

The pound slid to a three-week low of $1.3306 against the dollar as renewed military strikes between Iran and Israel drove investors into safe-haven assets.

"The escalation caught markets off guard after two months of relative calm under the April ceasefire," said Sarah Lin, markets analyst at Edgen. "Currency markets are pricing in a prolonged period of heightened geopolitical risk."

Sterling touched $1.3306 in early Asian trading before recovering slightly to $1.3330. Iran launched three salvos totaling 22 to 24 ballistic missiles at Israel on Monday, the Israel Defense Forces said, while Israel struck nine Iranian air defense and radar systems plus a petrochemical complex in Khuzestan province. Yemen's Houthi rebels also fired two missiles at Israel and threatened to resume targeting Israel-affiliated vessels in the Red Sea.

The breakdown of the US-brokered April 8 ceasefire threatens to reignite a conflict that has already disrupted global energy markets, with Iran maintaining its stranglehold on the Strait of Hormuz — a passage for about a fifth of the world's oil. President Donald Trump called on both sides to "immediately stop shooting," while diplomatic efforts led by Pakistan, Egypt and Qatar struggled to salvage the truce.

The dollar index strengthened broadly as traders sought refuge in US assets, with the yen and Swiss franc also gaining against sterling. Oil prices rose on supply concerns, with Brent crude climbing as the Houthi threat to Red Sea shipping added to the risk premium embedded in energy markets.

The IDF said the new conflict could last several days and may escalate into a full-blown war. Iran's paramilitary Revolutionary Guard described its missile fire as Operation Nasr, or "Victory," saying it targeted two military bases in Israel after Israeli strikes hit radar sites in three areas of Iran. Iranian Foreign Ministry spokesman Esmail Baghaei blamed the United States for the escalation, saying "no one believes that the Israeli regime would take any action without coordination with the United States."

Israel canceled school nationwide for the first time since the earlier round of fighting in April, while Saudi Arabia sounded missile alerts near Prince Sultan Air Base, which hosts US forces. The White House did not respond to questions about whether Israel's strikes were coordinated with Washington.

This article is for informational purposes only and does not constitute investment advice.