The past week has been unlike almost any other in recent memory for global markets. The joint US–Israeli military campaign against Iran, launched on 28 February under the codename Operation Epic Fury, has rapidly escalated into what analysts are now describing as the most significant geopolitical shock to energy markets since the Gulf War.
The strikes began with coordinated airstrikes on military and government sites across Tehran, Isfahan, Qom, Karaj and Kermanshah, and reportedly resulted in the assassination of Supreme Leader Ali Khamenei. What followed has been a cascading regional crisis. The US military’s Central Command reports it has struck more than 3,000 targets inside Iran and destroyed 43 Iranian warships since 28 February, while President Trump has demanded unconditional surrender from Tehran.
Iran’s response has been both broad and unprecedented. For the first time in history, Iran launched attacks against all six Gulf Cooperation Council countries: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE, having for decades avoided direct strikes on the Gulf region. Hezbollah entered the conflict on 2 March, launching missile attacks on Israel and prompting Israeli airstrikes into Lebanon, reopening a front that many had hoped was closed following the 2024 ceasefire.
The humanitarian picture is serious. At least 1,332 civilians have reportedly been killed in Iran, more than 200 in Lebanon, and the UN estimates that at least 330,000 people have been forcibly displaced across the region. Six US servicemen have also lost their lives.
The Strait of Hormuz: The Economic Epicentre
For those of us operating in currency and financial markets, the energy dimension of this crisis is the critical variable.
The Strait of Hormuz is now effectively closed to commercial shipping. Not through a formal naval blockade, but through the withdrawal of war-risk insurance, which for cargo operators has the same practical effect. An IRGC commander declared the strait “closed” and warned any vessel attempting passage would be set “ablaze”, with at least five tankers already damaged and approximately 150 ships stranded in the region.
Tanker traffic through the strait, which normally handles around a third of the world’s seaborne oil exports, has ground to a standstill as ship owners take precautionary measures. The numbers illustrate the scale of disruption clearly. Crude tanker transits dropped to just four vessels on Sunday 1 March, compared with a daily average of 24 since January. Around 200 internationally trading crude and product tankers are now effectively stranded in the Gulf.
Energy markets reacted swiftly. Brent crude surged between 10 and 13 percent to around $80–$82 per barrel by 2 March. European natural gas futures jumped by around 30 percent following strikes affecting Qatar, a major exporter of LNG, after QatarEnergy halted production at its two main facilities at Ras Laffan and Mesaieed Industrial City.
This is not a marginal development. Roughly 20 percent of the world’s LNG supply passes through the Strait of Hormuz, much of it originating from Qatar.
Goldman Sachs estimates that traders are currently pricing roughly $14 per barrel of geopolitical risk premium into oil markets. Their revised Brent forecast for Q2 sits at $76 per barrel, but they warn that a five-week disruption to Strait flows could push prices toward $100 per barrel. JPMorgan has gone further, suggesting Brent could reach $120 if the conflict persists beyond three weeks and forces Gulf producers to shut in output. In a more extreme scenario involving mines or sustained anti-ship missile attacks, Deutsche Bank has warned oil could approach $200 per barrel.
What This Means for Currencies
The inflation implications of this energy shock are the most immediate concern for currency markets.
Higher oil prices feed directly into inflation data, and any sustained move toward $100 per barrel will quickly reshape the rate-cutting conversation at both the Bank of England and the Federal Reserve.
This dynamic helps explain why Sterling has shown relative resilience in recent sessions. If energy-driven inflation remains elevated, the case for imminent interest rate cuts in the UK becomes weaker. The same logic applies in the United States, where markets that had been pricing multiple rate cuts through 2026 are now reassessing those expectations.
Higher rates for longer tend to support both Sterling and the US Dollar. The Dollar also benefits independently from safe-haven demand during periods of geopolitical stress.
Gold has naturally seen strong buying interest, while risk-sensitive currencies and equity markets have faced headwinds. The Euro appears particularly exposed given Europe’s reliance on imported LNG. Goldman Sachs has warned that a disruption to Strait flows lasting more than two months could push European natural gas prices above €100 per megawatt hour.
The Week Ahead: Data in Context
While geopolitical headlines will continue to dominate market sentiment, the scheduled economic data still matters, particularly as investors attempt to recalibrate inflation expectations.
There are no major releases at the start of the week, so attention quickly turns to Wednesday’s US CPI data, expected at 2.4 percent. The figure itself may already be somewhat backward-looking given the recent surge in energy prices, meaning markets will be more focused on forward guidance and how policymakers interpret the inflationary impulse from oil.
The broader risk for central banks is stagflation: rising prices combined with slowing economic growth. Historically, this is one of the most difficult environments for monetary policy.
Thursday brings US weekly jobless claims, expected to hold around 2.4 percent. This release carries additional importance following last week’s softer-than-expected US employment data. A labour market beginning to soften just as inflation pressures rise would create a challenging backdrop for policymakers and could increase volatility in the Dollar.
Friday is the most data-heavy day of the week. UK GDP is expected to come in at 0.2 percent month-on-month, which, if confirmed, would offer modest support for Sterling. Eurozone industrial production follows, with expectations of a decline to 0.6 percent, potentially weighing on the Euro. The week concludes with US GDP, where the consensus estimate currently sits at 1.4 percent. Markets will analyse this carefully to determine whether the US economy entered this energy shock with sufficient momentum.
The Bigger Picture
In a baseline scenario involving a resolution within four weeks and a transition of power in Iran, Brent crude is expected to spike temporarily before eventually stabilising closer to $70 per barrel by the end of the year.
However, a prolonged conflict involving sustained disruption to Strait of Hormuz shipping could push prices toward $100 per barrel. In a more severe scenario involving sustained attacks on Gulf energy infrastructure, prices could move well beyond that before markets begin to adapt.
For businesses and individuals managing cross-border currency exposure, the message is clear: volatility is elevated and the range of outcomes is wide. This is not an environment in which to leave currency risk unmanaged.
Whether you are an importer paying overseas suppliers, a business with dollar or euro obligations, or a private client completing an international property transaction, the events of the past week are a reminder that currency markets can move sharply and unexpectedly when geopolitical risk enters the equation.
In periods like this, having a clear strategy matters. Forward contracts, limit orders and structured hedging tools allow businesses and investors to protect budgets and remove uncertainty from large international payments.
If you have upcoming currency requirements, now is a sensible time to review your exposure and ensure you are properly protected against what could remain a volatile period for global markets.
GBP/EUR 1.1531 GBP/USD 1.3332 GBP/AED 4.8979
GBP/AUD 1.9006 GBP/CHF 1.0390 GBP/CAD 1.8079
GBP/NZD 2.2579 EUR/USD 1.1545 GBP/ZAR 22.3324