By Harry Robertson 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
Sterling slides as Trump vows more strikes on Iran, driving up dollar
Market Reactions to Escalating Tensions in the Middle East
By Harry Robertson
Sterling's Performance Amid Geopolitical Uncertainty
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 prices surging and investors flocking to the U.S. dollar.
Sterling was last down 0.74% at $1.3208, just a day after rising 0.6% on hopes that the war could soon be winding down. It earlier fell as much as 0.95%.
Impact of Dollar Strength
The drop was largely a function of a jump in the dollar, which is seen as a safe-haven asset. The index measuring the greenback against a basket of other major currencies rose 0.59%.
Britain's Economic Vulnerabilities
Britain is also highly exposed to energy imports and investors remain nervous about the country's fragile public finances. Yields on British government bonds jumped on Thursday as energy prices surged.
"Gilt yields are back in uncomfortable territory for the government, and for sterling," said Nick Rees, head of macro research at Monex Europe.
Trump's Statements and Global Market Impact
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 Market Response
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.
Oil prices jumped after Trump's speech and stock markets and equity futures tumbled. Brent crude, the global benchmark, was last up 7.8% at $109.11 a barrel.
Safe-Haven Flows and Risk Aversion
"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."
Currency Movements Across Europe
Sterling and Euro Performance
Sterling dipped against the euro on Thursday, with the euro zone currency up 0.18% at 87.27 pence.
The pound fell 1.9% against the dollar in March as the war raised concerns about an energy shock hitting the economy.
Broader European Currency Trends
Meanwhile, the euro fell 2.2% against the U.S. currency in a sign that almost all European economies are expected to slow.
(Reporting by Harry Robertson; Editing by Jan Harvey, Kirsten Donovan)
