Sterling rises on Israel-Iran ceasefire, reflecting a surge in global risk sentiment witnessed on Tuesday. The British pound, also known as sterling, appreciated against both the euro and the U.S. dollar. The appreciation was fueled by the announcement of a ceasefire between Israel and Iran, which was made public by U.S. President Donald Trump.
Relief was observed across global markets, and a rally in risk assets was triggered. Investors reacted positively to the news, driving gains in equities and commodities. In the currency markets, sterling emerged as a beneficiary, as the British currency tends to perform well in environments marked by reduced geopolitical tension.
Sterling Rises on Israel-Iran Ceasefire Announcement
A significant geopolitical development was introduced into the markets when President Trump announced a ceasefire agreement between Israel and Iran. The announcement followed weeks of intense military confrontations and heightened concerns about a broader Middle East conflict.
Global investors had been keeping a close watch on the situation. Following the ceasefire, risk appetite was revived, and safe-haven flows were reduced. As a result, currencies such as the dollar and the Swiss franc lost ground while risk-sensitive assets, including the pound and global equities, were lifted.
Israeli Defense Minister Claims Truce Was Violated
Despite the ceasefire announcement, fresh tensions were reignited after Israeli Defence Minister Israel Katz stated on Tuesday that he had instructed the military to strike targets in Tehran. According to Katz, missiles had been launched by Iran, allegedly breaching the truce agreement. However, Iran promptly denied these allegations, stating that no missile launches had been carried out towards Israeli territory in recent hours.
The conflicting statements created a brief moment of uncertainty in the market, yet the overall sentiment remained positive, buoyed by the initial ceasefire news.
Sterling’s Reaction in the Forex Market
Sterling’s appreciation was strongly noted in the forex market. Against the dollar, the pound rose by 0.6% to $1.2790, while against the euro, a gain of 0.4% was registered, bringing the GBP/EUR pair to €1.1795. The rally was supported not only by global risk appetite but also by improved sentiment around the UK economy.
Market analysts noted that sterling has been increasingly influenced by global events, especially in the absence of major domestic data releases. The currency’s safe but flexible profile made it attractive during this period of renewed optimism.
Risk Assets Enjoy a Broad-Based Rally
Following the ceasefire announcement, equity markets across Europe and Asia experienced a sharp rebound. The FTSE 100 in London was boosted by more than 1.2%, while Germany’s DAX and France’s CAC 40 each rose by over 1%. U.S. stock futures also pointed to a higher opening, indicating that the risk-on sentiment was likely to carry into Wall Street’s trading session.
Oil prices, which had spiked amid Middle East tensions, eased slightly but remained elevated, reflecting ongoing concerns over supply disruptions. Gold, which typically acts as a safe haven, saw a mild pullback as investors rotated back into riskier assets.
Market Sentiment Supported by Diplomatic Efforts
The ceasefire was viewed as a victory for diplomacy. Behind-the-scenes negotiations were reportedly facilitated by U.S., European, and regional mediators, who worked to defuse tensions and prevent a broader escalation. The temporary calm allowed investors to shift their focus back to macroeconomic fundamentals and central bank policy expectations.
It was noted by analysts that markets had been extremely sensitive to any sign of de-escalation. With the ceasefire in place—despite Israel’s subsequent allegations—the overall tone in financial markets remained cautiously optimistic.
Central Bank Outlook Adds to Sterling Support
Additional support for sterling was derived from expectations that the Bank of England might adopt a less dovish stance in the coming months. Although inflation in the UK had shown signs of cooling, wage growth and employment figures remained strong, prompting some speculation that interest rates might remain higher for longer.
While no immediate policy shift was signaled by the BoE, the combination of geopolitical stability and a stable domestic outlook contributed positively to the pound’s performance.
Geopolitical Risk Still Lingers
Despite the upward move in risk assets, geopolitical risk has not been entirely dismissed. Markets remained vigilant, with attention fixed on any future developments from the Israel-Iran conflict zone. The situation was seen as fragile, and any renewed aggression could swiftly undo the gains made by sterling and other risk-sensitive assets.
Nevertheless, for now, a temporary sense of calm prevailed, providing traders with an opportunity to engage in risk-on strategies.
Conclusion
The announcement of a ceasefire between Israel and Iran triggered a rally in risk assets and lifted sterling against major currencies. While tensions briefly flared following allegations from Israel, market sentiment held firm, favoring currencies and assets associated with risk. Sterling’s gain was amplified by broader optimism and expectations regarding the Bank of England’s future actions.
Although the geopolitical landscape remains uncertain, markets responded positively to the ceasefire, and sterling was positioned as a short-term beneficiary. Going forward, investors will likely remain alert to any shifts in the fragile truce, as well as upcoming economic indicators and central bank communications.
