Over the weekend, the U.S.–Iran conflict shifted back toward confrontation, with the Strait of Hormuz once again becoming the focal point. Going into Friday, markets were watching what looked like a fragile ceasefire, alongside early signs that some commercial shipping might cautiously resume under strict Iranian conditions. At the same time, a U.S. naval blockade of Iranian ports remained firmly in place, and there were tentative reports pointing toward a potential new round of diplomatic talks in Islamabad. That combination gave markets a small window of optimism that tensions might stabilise, at least in the short term.
That more constructive tone quickly faded over the weekend. Iran’s Revolutionary Guard confirmed that the Strait of Hormuz had been fully closed again, directly linking the move to the ongoing U.S. blockade. Reports also emerged of fast-attack craft engaging with commercial vessels in the region, including tankers and container ships, highlighting the immediate risk to global shipping routes. The U.S. has maintained its hard stance, keeping the blockade in full effect and signalling a more aggressive response to any further disruption at sea.
On the diplomatic front, what had looked like a likely second round of talks is now far less certain. Iranian officials have pushed back against negotiations under current conditions, while the U.S. continues to signal that pressure will remain until a deal is reached. With the current ceasefire window expected to expire mid-week, markets are heading into the new trading week facing a highly uncertain and binary backdrop. Either tensions begin to ease through renewed talks, or we move further into escalation, and markets will react accordingly.
From a market perspective, this creates a classic risk environment. Oil prices remain highly sensitive to any developments around the Strait, given its importance to global supply. Safe-haven assets such as gold are likely to remain supported, while currency markets are expected to stay volatile. The US Dollar may continue to benefit from defensive flows, although that will compete with ongoing expectations around future rate cuts. Overall, this is a market where headlines will continue to drive direction more than underlying data.
From a data perspective, the early part of April has been relatively quiet, particularly for the UK, but this week brings a busier calendar. That said, geopolitics is still likely to dominate, with economic releases acting more as secondary drivers unless there are meaningful surprises.
Monday starts with Canadian CPI, expected to rise to 2.6%, reflecting the early impact of higher energy prices. New Zealand CPI is also due, expected to fall slightly to 2.9%, moving closer to target, although this trend may reverse in Q2 if energy pressures persist.
Tuesday shifts focus to the UK labour market, with unemployment expected to hold at 5.2%. As always, any deviation from expectations could move Sterling, particularly given how sensitive the Pound currently is to domestic data. Germany’s ZEW survey follows, with sentiment expected to drop to -7.0, which would reinforce concerns around the Eurozone outlook. In the U.S., retail sales are forecast at 1.4%. While an improvement on previous readings, this still reflects relatively subdued consumer momentum.
Wednesday is the key day for Sterling, with UK CPI for March expected to rise to 3.3% from 3.0%. This marks the early impact of higher energy costs feeding into inflation, and markets will be watching closely to see if this becomes a sustained trend. If inflation continues to rise, it complicates the Bank of England’s path and could keep rate expectations elevated.
Thursday brings flash PMI data from both the Eurozone and the UK, with all readings expected to weaken. While these are preliminary estimates, they are often a reliable early indicator of economic momentum. Softer readings would reinforce the narrative of slowing growth across both regions, which is not particularly supportive for either the Euro or Sterling.
Finally, Friday rounds out the week with UK retail sales. The previous reading came in at -0.4%, and expectations for March are flat at 0.0%. While technically an improvement, it still points to a weak consumer backdrop. If confirmed, it is unlikely to provide meaningful support for the Pound.
This is shaping up to be another week where markets are driven more by geopolitics than fundamentals.
With the Strait of Hormuz closed, shipping risks rising, and diplomatic progress uncertain, price action is likely to remain reactive and, at times, unpredictable. Economic data will still matter, particularly UK inflation and U.S. consumption, but it is unlikely to override the broader geopolitical narrative unless we see major surprises.
For FX markets, this creates a challenging environment. Moves are likely to be sharp but not always sustained, with sentiment capable of shifting quickly on any new headline. As always in conditions like this, timing and flexibility will be key.
GBP/EUR 1.1465 GBP/USD 1.3486 GBP/AED 4.9567
GBP/AUD 1.8864 GBP/CHF 1.0545 GBP/CAD 1.8469
GBP/NZD 2.2982 EUR/USD 1.1751 GBP/ZAR 22.1249