USD Strengthens as Oil Nears $100: What It Means for GBP, EUR and Global FX Markets

Key Highlight

• The US dollar is strengthening as investors move toward safe-haven assets amid rising geopolitical tensions.

• Oil prices briefly surged above $100 per barrel, driven by concerns over potential disruption to global energy supply through the Strait of Hormuz.

• Sterling is under pressure after weaker-than-expected UK growth data highlighted fragility in the economy.

• Expectations for Bank of England rate cuts have shifted, with some economists now pushing the first potential cut back to July due to renewed inflation risks.

Market Recap

Currency markets moved firmly in favour of the US dollar this week as geopolitical tensions in the Middle East intensified and energy prices spiked. Concerns about a prolonged disruption to global oil supply — particularly around the Strait of Hormuz — pushed Brent crude briefly above the $100 mark and increased risk aversion across financial markets.

As a result, investors rotated into the dollar, pushing it to its strongest level in nearly two months. Both GBP/USD and EUR/USD slipped roughly 0.4% during the session.

The jump in oil prices has also altered expectations for central bank policy. Rising energy costs risk feeding into inflation again, leading some analysts to revise their outlook for interest rate cuts. Economists at Goldman Sachs now expect the Bank of England’s first rate cut to be delayed until July, rather than April, due to inflation risks linked to the Middle East conflict.

Market Update

The dollar has continued to trade firmly today as oil prices remain volatile around the $100 level. Markets are currently weighing slightly improved global supply conditions — after the US allowed limited Russian oil sales — against ongoing geopolitical tensions involving Iran and the strategic Strait of Hormuz shipping route.

Meanwhile, the pound has weakened following disappointing UK economic data. UK GDP unexpectedly stalled in January, coming in flat compared with forecasts for modest growth. Weakness in both the services sector and industrial production outweighed gains in construction, reinforcing concerns that the UK economy was already slowing before the latest energy shock.

GBP/USD is currently hovering near the lowest levels seen earlier this month, while EUR/USD has slipped to lows last seen in mid-2025.

Attention now turns to a busy US data schedule later today. Markets will closely watch the Core PCE Price Index, the Federal Reserve’s preferred measure of inflation. Current expectations are for inflation to remain relatively firm, which could reinforce the narrative of higher-for-longer US interest rates.

Additional data releases including US consumer spending, income figures, and labour market indicators will also provide further insight into the resilience of the US economy. In Canada, employment data will be monitored closely, with the unemployment rate expected to rise slightly.

For currency markets, the key driver remains the intersection between energy prices, geopolitical developments, and inflation expectations. The sharp rise in oil earlier this week has strengthened demand for the US dollar while pushing bond yields higher.

Unless energy prices retreat significantly or US inflation data surprises to the downside, the dollar is likely to remain supported in the near term, particularly heading into next week’s central bank meetings.

13th March 2026

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