Finance
Pound Heads for Biggest Gain in Three Weeks After US/Iran Ceasefire
Published by Global Banking & Finance Review®
Posted on April 8, 2026
2 min readLast updated: April 8, 2026
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After the US‑Iran ceasefire triggered a sharp drop in oil prices and eased geopolitical fears, the pound surged to its strongest level since March 23, approaching its pre‑conflict value and prompting markets to scale back rate‑hike expectations.
Pound Sterling Surges After US-Iran Ceasefire and Oil Price Drop
Market Reactions to US-Iran Ceasefire and Oil Price Movements
Sterling's Performance Amid Global Optimism
LONDON, April 8 (Reuters) - The pound headed for its biggest one-day gain in three weeks on Wednesday, after the United States and Iran agreed to a two-week ceasefire that ignited a surge of optimism across global markets as oil prices slid.
Sterling is just 0.4% below where it was prior to the start of the conflict in late February and was last up 1% on the day at $1.342, the highest since March 23.
Impact of Oil Price Drop on Financial Markets
Brent Crude Futures and Marine Traffic
Brent crude futures fell by as much as 16% in early trading, as investors welcomed the prospect of a sustained truce that might allow the resumption of flows of marine traffic through the Strait of Hormuz, which Iran has effectively blocked since the start of the war.
Central Bank Rate Hike Expectations
Money markets showed traders have scaled back their bets on a series of rate hikes by the big central banks this year. Prior to the announcement, traders were pricing in the prospect of at least two rate hikes by the Bank of England this year. That has now been brought back to just one hike in 2026, with an outside chance of a second.
Sterling Versus the Euro
Currency Movements and Analyst Insights
Against the euro, the pound was marginally stronger on the day, as the single European currency traded down 0.2% at 87.12 pence, which ING strategist Chris Turner was a little surprising, given that investors have not cut back their expectations for the European Central Bank quite as aggressively as for the BoE, which in theory, would give the euro a lift.
Expert Commentary
"One might have thought EUR/GBP could be trading a little higher were Bank of England policy tightening to be priced out more quickly than that of the ECB. Still, EUR/GBP continues to trade over 0.8700 and should find good support on dips," he said.
Reporting Credits
(Reporting by Amanda CooperEditing by Keith Weir)
Key Takeaways
- •A two‑week US‑Iran ceasefire prompted a plunge in oil prices—Brent dropped roughly 13%–16%—boosting risk appetite globally (apnews.com).
- •Sterling rallied sharply, reaching $1.342—the highest since March 23 and just 0.4% below its pre‑war level—marking its largest one‑day gain in three weeks (apnews.com).
- •Markets trimmed expectations for central bank tightening: bets shifted from two Bank of England hikes in 2026 to just one, while the euro‑pound exchange rate remained stable despite diverging ECB expectations (apnews.com).
References
Frequently Asked Questions about Pound heads for biggest gain in three weeks after US/Iran ceasefire
1Why did the pound sterling rise sharply on April 8?
The pound rose after the US and Iran agreed to a two-week ceasefire, boosting market optimism and causing oil prices to drop.
2How did the ceasefire affect oil prices?
Brent crude futures dropped by as much as 16% as investors welcomed the prospect of resumed marine traffic through the Strait of Hormuz.
3What impact did the ceasefire have on Bank of England rate hike expectations?
Traders reduced their expectations for Bank of England rate hikes, now anticipating just one hike in 2026.
4How did sterling perform against the euro after the ceasefire announcement?
Sterling was marginally stronger against the euro, with EUR/GBP trading down 0.2% at 87.12 pence.
5What role did the Strait of Hormuz play in the market reaction?
The prospect of reopening marine traffic through the Strait of Hormuz contributed to optimism and oil price declines.
