Finance
Sterling slumps as oil's surge to $120 on iran war rocks markets
Published by Global Banking & Finance Review®
Posted on March 9, 2026
3 min readLast updated: March 9, 2026
Quick Summary
Sterling fell sharply as oil surged—Brent near $120—amid the escalating U.S.–Iran war, prompting a rush into the dollar and spooking UK bonds and equities.
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)
Key Takeaways
- •Crude oil spiked over 25% to highs near $120 a barrel on March 9, driven by supply disruptions around the Strait of Hormuz amid escalating U.S.–Iran hostilities (investing.com).
- •Sterling dropped about 0.8% to $1.331, marking its weakest intraday performance in over a month as investors fled to the U.S. dollar as a safe-haven (theguardian.com).
- •UK 10‑year gilt yields soared—yields jumped by about 15–20 basis points—as markets sharply pared back expectations of Bank of England rate cuts this year (tradingeconomics.com).
References
Frequently Asked Questions about Sterling slumps as oil's surge to $120 on Iran war rocks markets
1Why did Sterling slump on Monday?
Sterling slumped as investors sought safety in the U.S. dollar due to a surge in oil prices driven by the U.S.-Iran war.
2How much did oil prices rise during the market turmoil?
Oil prices jumped more than 25% to reach as high as $119.50 per barrel, their highest since mid-2022.
3What is the impact of rising oil prices on the UK economy?
Rising oil prices can increase inflation and energy costs, pressuring the UK government to consider support for households.
4How are British government bonds affected?
British government bonds tumbled, with 10-year gilt yields rising over 15 basis points to their highest level since September.
5Is there a chance the Bank of England will raise interest rates?
Traders are now pricing in more than a 50% chance the Bank of England will raise interest rates this year.
