The United States announced plans to begin guiding neutral ships trapped in the Persian Gulf out through the Strait of Hormuz starting Monday, in response to ongoing tensions and conflict in Iran, which has now entered its third month [1][2][3]. According to Bloomberg, Donald Trump stated that this initiative is intended to help civilian vessels from non-aligned countries exit the contested waterway and resume normal operations [2][3]. However, top Iranian lawmaker Ebrahim Azizi warned that any US interference in the Strait will be considered a violation of the ceasefire, emphasizing that the Strait of Hormuz and the Persian Gulf are not a place for rhetoric [1][3].
The geopolitical developments have had notable impacts on currency markets. The Pound Sterling (GBP) advanced against the US Dollar (USD), trading around 1.3600, supported by the Bank of England's (BoE) decision to hold the bank rate steady at 3.75% and signals of potential rate hikes later this year. BoE Governor Andrew Bailey warned of 'forceful tightening' if energy price shocks from the Middle East conflict continue to drive inflation [1]. However, uncertainty in the Middle East and the Strait of Hormuz capped further gains for the GBP, as safe-haven demand supported the USD [1].
The Indian Rupee (INR) held ground, with USD/INR trading around 94.90, following the release of India's HSBC Manufacturing PMI at 54.7 for April, revised down from 55.9 but higher than the previous month's 53.9 [2]. The Rupee found some support from improved market sentiment amid ongoing mediation efforts between the US and Iran, and from softer oil prices, with West Texas Intermediate (WTI) trading around $98.30 per barrel [2]. Despite this, the INR remains under pressure due to high oil prices, sustained dollar demand from refiners, and significant portfolio outflows, which reached about $6.5 billion in April and $20.6 billion cumulatively for 2026, according to Reuters [2].
The USD/CHF pair slipped to near 0.7800 as the US Dollar weakened amid easing safe-haven demand, with traders closely monitoring progress in US–Iran peace negotiations [3]. Swiss retail sales data showed a 0.5% year-on-year increase in March, below expectations, and a modest 0.1% monthly rise [3].
Across all markets, traders are awaiting the US employment report for April, with expectations of 73,000 job additions and an unemployment rate steady at 4.3% [1][3]. Any signs of weakening in the US labor market could weigh on the USD against other currencies [1][3].
CONCLUSION
The US decision to escort neutral ships through the Strait of Hormuz has heightened geopolitical tensions, impacting global currency markets and supporting safe-haven demand. While the GBP and INR found some support from domestic factors and easing oil prices, ongoing uncertainty in the Middle East continues to cap gains and drive market caution. Investors are now focused on upcoming US employment data, which could further influence currency movements.