Middle East Escalation Overshadows Ceasefire Prospects

Publish Date

June 1, 2026

Global markets remained uncertain with further escalation in the Iran war, with the U.S. carrying out fresh strikes across the region amid reports of a downed military drone. The US Dollar came out slightly stronger as investors looked for a safe-haven amid Iran-related tensions. As a result, the British pound and Euro came out slightly weaker, as the Dollar was preferred by the markets during the political uncertainty last week.

Last Week

GBP –The British pound weakened slightly over the course of the week. Investor demand for the U.S. dollar increased due to heightened tensions in the Middle East, particularly involving Iran, which supported the dollar as a safe-haven currency.

At the same time, market expectations that the Bank of England may take a cautious approach to future interest-rate decisions limited support for sterling. As a result, GBP ended the week modestly lower against the U.S. dollar while remaining relatively stable against the euro. The pound experienced a mild downturn, mainly due to geopolitical uncertainty and stronger demand for the U.S. dollar.

USD-The Dollar experienced a boost versus other majors last week. Softer Personal Consumption Expenditure (PCE) data coming out on Thursday eased treasury yields and as a result, the Dollar weakened against some major currencies after the release.

Despite this, after fresh US strikes in Iran after reports of a downed US drone, investors turned to the Dollar as a safe haven amid renewed uncertainty and rising geopolitical tensions within the region.

The U.S. dollar ended the week slightly stronger overall, benefiting from geopolitical uncertainty, although softer inflation data tempered its gains.

EUR –The euro traded slightly lower over the course of the week, pressured by the broader strength of the U.S. dollar as investors sought safe-haven assets amid escalating tensions in the Middle East. While Eurozone economic data remained relatively stable, geopolitical concerns dominated market sentiment and limited appetite for risk-sensitive currencies. Markets also continue to assess the outlook for further European Central Bank policy easing following recent rate cuts, which kept upward momentum in the single currency constrained.

Key Events to Watch this week :

US Manufacturing Data (1st June)

Nonfarm Payrolls (5th June)

GDP Data Eurozone (5th June)

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Middle East Escalation Overshadows Ceasefire Prospects

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