Ceasefire Surge: Pound Soars as Markets React to US-Iran Truce

The British pound experienced its largest one-day gain in recent weeks as the United States and Iran agreed to a two-week ceasefire, sparking a wave of optimism in global markets. This development led to a significant decrease in oil prices, contributing to the pound's appreciation against other currencies.

Following this truce, Brent crude futures saw a sharp drop of up to 16% in early trading. Investors are hopeful that a durable peace could restore the passage of marine traffic through the strategically critical Strait of Hormuz, previously obstructed by Iran since the onset of hostilities.

Financial markets have reacted by scaling back expectations for imminent rate hikes by major central banks. Prior assumptions of multiple rate hikes by the Bank of England this year have been adjusted to just one in 2026, with a minor possibility of a second. The pound has also gained marginally against the euro despite robust expectations for the European Central Bank.