The pound rises against the dollar as artificial intelligence fears ease and oil declines

Oil prices fell by more than 3 percent during trading on Monday, with growing hopes for progress in diplomatic efforts to end the war in the Middle East, after an unconfirmed media report stated that Iran was backing down from its demands related to controlling the Strait of Hormuz and imposing transit fees on ships passing through it.

Brent crude futures fell by 3.6 percent to $94.8 per barrel, continuing their losses after last week recording the largest weekly decline since April 2020, while US crude prices also fell with renewed bets on the possibility of containing regional escalation.

The latest wave of decline came after a report published by the “Israel Hayom” newspaper, which stated that Tehran had apparently abandoned its demand to control the Strait of Hormuz and collect fees from ships crossing the strategic waterway. However, Bloomberg indicated that it was not able to immediately verify the accuracy of this information.

Prices had begun to decline earlier, after US President Donald Trump said, over the weekend, that launching large-scale strikes on Iran was “extremely unlikely,” but he linked this to Tehran reaching an agreement that he described as “very strong.”

These developments come in the wake of a wave of decline in oil prices from their highest levels in six months, which they recorded at the end of October, with the decline of fears of a widespread escalation of the war, following the gains achieved by the Democrats in the US midterm elections, and the subsequent decline of some expectations regarding the expansion of the confrontation.

The pound sterling rose against the dollar on Monday, recovering most of its losses recorded on Friday, in light of the decline in fears related to artificial intelligence stocks, which had supported the US currency at the end of last week, in addition to the decline in oil prices.

The relative improvement in market sentiment led to a decrease in demand for safe-haven assets, such as the dollar. The British pound rose slightly by more than 0.5 percent, reaching $1.3421, after falling by more than 0.7 percent on Friday, according to Reuters.

The pound settled at 83.41 pence per euro, without significant change during Monday’s trading, to remain close to its highest levels in 20 months, which it recorded last week, after the Bank of England raised interest rates and indicated the possibility of continuing monetary tightening unless the war with Iran witnessed a calm that would push oil prices to decline.

Brent crude futures fell by 3.2 percent, during Monday’s trading, to $95.16 per barrel, after US President Donald Trump reduced the possibilities of renewed strikes on Iran. However, attacks targeting ships near the Strait of Hormuz kept supply concerns in the spotlight.

Oil prices have declined in recent weeks, with growing market optimism about the possibility of reaching a settlement to the conflict in the Middle East, but they are still much higher than their levels recorded before the outbreak of war.

Central bank policymakers and investors continue to assess the economic fallout from the conflict and the resulting rise in energy prices.

British GDP data is scheduled to be released later this week. A Reuters poll of economists' opinions is expected to show growth of 0.7 percent during the third quarter, accelerating compared to the previous quarter.

Economists at Deutsche Bank said in a note that the performance of the British economy during 2026 was not limited to demonstrating the ability to withstand, noting that initial indicators of improved productivity growth contributed to enhancing economic activity.

They added that capital spending growth also supported output, with spending on artificial intelligence, defense and industrial policies contributing to growth.

They noted that consumer spending remained strong, despite the shock of rising energy prices, while businesses maintained a relatively good level of confidence, despite geopolitical uncertainty remaining at high levels.

But economists warned that “the factors supporting economic growth will likely face equally strong adverse pressures,” in light of the continued impact of the energy price shock on the incomes available for families to spend.