LONDON, March 9 (Reuters) - The pound tumbled on Monday as investors rushed to the safety of the U.S. dollar and ditched the currencies of countries most exposed to rising energy costs, as the U.S.-
Sterling Plunges on $120 Oil Amid U.S.-Iran War, UK Markets Rattled
Market Turmoil as Oil Surges and Sterling Falls
LONDON, March 9 (Reuters) - The pound tumbled on Monday as investors rushed to the safety of the U.S. dollar and ditched the currencies of countries most exposed to rising energy costs, as the U.S.-Iran war sent oil prices surging to $120 a barrel.
Sterling and Currency Movements
Sterling was last down 0.81% at $1.331 and on track for its biggest daily fall in over a month.
Sterling was little changed against the euro, which also tumbled against the dollar as investors moved into a currency seen as a safe haven thanks to its dominant role in global finance.
The dollar has also benefited from the United States' status as a leading oil and gas producer. By contrast, Britain and the euro zone are heavily reliant on oil and gas imports.
The euro was last flat against the pound at 86.63 pence.
Impact on UK Bonds and Stocks
Meanwhile, British government bonds tumbled for a third day and stocks dropped as investors weighed up the potential impact on the UK economy.
British government bonds tumbled again on Monday with yields on 10-year gilts surging more than 15 basis points (bps) to their highest levels since September at 4.776%. Yields rise as prices fall and vice versa.
The FTSE 100 fell 1.5% in early trading, outperforming broader European shares which were down 2% thanks to the index's larger weighting of energy companies.
Oil Price Surge and Global Response
Oil prices jumped more than 25% to their highest levels since mid-2022 on Monday, with the global benchmark Brent crude touching $119.50 per barrel.
Major Gulf producers cut supplies and shipping disruptions rattled the market as the U.S.-Iran war showed few signs of slowing down.
"It's been the biggest jump since the outbreak of the pandemic, and investors are bracing for an inflation crisis," said Susannah Streeter, chief investment strategist at Wealth Club.
G7 and Government Measures
The Financial Times reported that G7 finance ministers plan to discuss a possible release of petroleum from reserves, helping temper some of the market moves. Brent crude was last up 16% at $107.80 a barrel.
Traders were weighing the potential costs of government support for energy bills after UK Prime Minister Sir Keir Starmer said supporting people with the cost of living would be at the top of his mind.
"A market theme for this week is set to be consideration of the implications of potential fiscal interventions to manage the impact of higher energy prices," said Sam Hill, head of market insights at Lloyds Bank.
Hill and his colleagues said UK support for households related to the Russia-Ukraine spike energy prices in 2022-2023 is estimated to have cost 52 billion pounds ($69 billion).
Bank of England and Interest Rate Outlook
Traders on Monday were pricing in a more than 50% chance the Bank of England raises interest rates this year, a sharp reversal from February when two cuts were priced in.
($1 = 0.7499 pounds)
(Reporting by Harry Robertson)
