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Pound sterling is softer against the euro and dollar on Thursday as technical headwinds weigh and a deterioration in the Strait of Hormuz weighs on investor sentiment.
It's reported the U.S. carried out airstrikes on an Iranian military site and imposed new sanctions to prevent Tehran from profiting from vessels transiting the Strait of Hormuz.
Iranian forces, meanwhile, fired on four ships, one of them an American tanker.
The GBP/EUR and GBP/USD tend to struggle when risks are heightened, meaning news that Iran and the U.S. have traded blows in the Strait over recent hours is likely to pressure both pairs.
"Oil prices and the U.S. 10-year Treasury yield have subsequently risen slightly, EUR/USD falls towards its lowest levels in May, Asian stock markets fall, while US as well as European stock market futures indicate a negative stock market opening later today," says Karl Steiner, Head of Analysis at SEB.
The pound to dollar exchange rate sinks 0.33% on the day to 1.3390, the pound to euro exchange rate slides 0.05% to 1.1540.
"The US dollar index rose on Thursday, moving near weekly highs as renewed escalation in the Middle East weakened hopes for a near-term peace agreement and reinforced demand for the currency," says Li Xing, Financial Markets Strategist Consultant to Exness.
The skirmishes are consistent with a steady and ongoing tension between the U.S. and Iran as they continue to negotiate in the background with a view to securing a durable deal.
However, the perennial optimism of global markets (U.S. indices relentlessly printing new records) suggests traders will discount recent developments, which should limit downside pressure on the day's losers, such as the pound.
Indeed, at the time of writing, neither the U.S. nor Iran is saying the ceasefire has collapsed. U.S. officials describe actions as defensive.
That will keep the GBP dip shallow.
GBP/EUR Setup Still Mildly Bullish
Tactically, GBP/EUR continues to trade within a broad medium-term recovery structure, but the latest daily chart suggests momentum has stalled beneath major resistance at 1.1600.
It continues to hold above the former breakout region around 1.1460–1.1480, which has transitioned from resistance into support and now acts as a key pivot zone.
Since the November 2025 low near 1.1280, sterling has carved out a sequence of higher lows supported by the rising trendline visible from late 2025 into May 2026, indicating the broader bullish structure remains intact for now.
GBP/USD Structure Turns Lower
For pound-dollar, momentum indicators on the daily chart suggest the downside is favoured in the short term:
Lower highs have emerged since the May peak, rallies are becoming shallower and sellers continue to defend the 1.3480–1.3600 resistance corridor aggressively.
The key downside level remains 1.3250.
A break beneath that support would significantly weaken the broader recovery narrative and expose the April low near 1.3160, which represents the major structural floor for the current medium-term range.
On the topside, sterling bulls need to reclaim 1.3480 initially before any renewed challenge of 1.3600 becomes realistic
