Sterling Falls Sharply as Trump Vows Strikes on Iran, Driving Up Dollar
By Harry Robertson
Market Reaction to Trump’s Iran Comments
Sterling and Dollar Movements
LONDON, April 2 (Reuters) – The pound fell sharply on Thursday after U.S. President Donald Trump vowed more aggressive strikes on Iran and gave little reassurance about the reopening of the Strait of Hormuz, sending oil surging and investors flocking to the U.S. dollar.
Sterling was last down 0.7% at $1.321, just a day after rising 0.6% on hopes that the war could soon be winding down.
The fall was largely a function of a jump in the dollar, which is seen as a safe-haven asset. The index measuring the U.S. currency against its peers rose 0.5%.
Trump’s Televised Address
Escalation of Military Operations
In a televised address on Wednesday, Trump said military operations would be intensified in the next two to three weeks and offered no concrete timeline for ending the conflict.
“We’re going to hit them extremely hard over the next two to three weeks,” he said. “We’re going to bring them back to the Stone Ages where they belong.”
Strait of Hormuz and Oil Supply
Trump said the U.S. did not need the Strait of Hormuz and again challenged allies who depend on Gulf oil to work towards reopening it.
Impact on Oil and Financial Markets
Oil Prices Surge
Oil prices jumped after Trump’s speech and stock markets and equity futures tumbled. Brent crude, the global benchmark, was last up 6.6% at $107.90 a barrel.
Safe-Haven Flows
Investor Sentiment
“Risk aversion is following the typical playbook that we’ve seen throughout the conflict,” said Michael Brown, senior research strategist at Pepperstone.
“Crude rallying, and taking everything but the dollar lower in turn, with the greenback remaining the only real safe haven.”
Broader Economic Concerns
Impact on UK Economy
The pound and British government bonds have been hit hard during the conflict, reflecting worries about the economy due to the country’s reliance on imported energy and its fragile public finances.
Sterling vs. Euro
Sterling dipped against the euro on Thursday, with the euro zone’s currency up 0.15% at 87.24 pence.
(Reporting by Harry Robertson; Editing by Jan Harvey)
