What the potential shutting to the Straight of Hormuz means..
| GBP
| Nothing good will come of the official shutting and aftermath of the Straight of Hormuz for Sterling. 0.5% has been lost against the safe-haven currencies since the weekend and rough seas lie ahead.
Remember GBP is not a safe-haven currency, but is the most powerful beta currency. This means it doesn't provide refuge for investors when there is uncertainty in the world, but does provide potentially large gains when all is well.
There are many reasons for this; volume of £ trading, central bank holdings, yields etc and even though the Pound was once the reserve currency of the world, it is no longer seen as a 'safe' bet for investors.
As the conflict in Iran is actively unfolding and no-one knows exactly what will happen next, this is only every going to be bad news for GBP. Just how bad will depend on how Iran retaliates to the US, who else gets involved, the damage to the world economy if the Straight of Hormuz closes, plus the many other variables already at play.
We see a near-term 'more to lose than to gain' scenario at this point for £ sellers.
EUR The Euro is a safe-haven currency as we have been reporting a lot this year and the one currency that has gained the most traction and value in 2025 so far.
However, in times of uncertainty like we are in right now, even the Euro has lost value against both the stronger and more supported CHF & USD. This trend will likely continue until clearer waters, but part of the trend is the Euro gaining on all other currencies especially GBP.
USD The USD has jumped over the weekend and a correction period could ensue as investors turn their attention towards the more important factors in the world right now.
Oil prices are surging, stocks are falling and this could just be the beginning of pandemonium OR we could all get off lightly and this de-escalate quickly.
The Straight of Hormuz sees a fifth of the world's oil and liquid gas flow, so you can see how and why the implications of it being shut could be disastrous. But it would be much worse for Iran's allies (mainly China) who depend highly on receiving oil from the region.
Please check out the main events of the week below..
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