06:17 AM EDT, 03/11/2026 (MT Newswires) -- Sterling's (GBP) performance stands out, said MUFG.

In fact, sterling is the third-best-performing G10 currency since the Iran conflict began, with only the Australian (AUD) and Canadian dollars (CAD or loonie) performing better, wrote the bank in a note to clients.

That is certainly somewhat surprising based on the most recent episode -- the Russia-related energy shock in 2022, pointed out MUFG. In the first month following the Russian invasion of Ukraine, sterling was the third-worst performing G10 currency and over three months it was still the third-worst performing G10 currency.

That said, over a longer period, the analysis the bank used for EUR/USD showed just a 0.1% drop for GBP/USD in response to a 10% jump in crude oil prices covering the post-United States shale production period. Sterling is now 0.4% weaker versus the US dollar (USD) from the closing level on Feb. 27.

The scale of moves in crude oil and the fluidity of Middle East developments makes it more difficult to make any clear conclusions at this stage but one clear difference relative to the early stages of the Russia-Ukraine energy price shock was that the front-end of the United Kingdom yield curve dropped initially, over the first few weeks but of course on this occasion there was an immediate jump. The two-year yield jumped 35bps last week, stated MUFG.

The Bank of England's Monetary Policy Committee will certainly be more wary of cutting rates, given the fact that there are already a number of hawks who were concerned, before this energy price spike, about the continued stickiness of underlying inflation. Higher energy prices feeding into food would likely impact inflation expectations and potentially keep wage growth higher. The OIS curve now has only 5bps of cuts priced by year-end, down from 53bps before the conflict.

Yield certainly appears to be supporting sterling, but whether that would persist is questionable given the potential hit to real incomes, added MUFG. Utility bill prices will, however, not be impacted until the next OFGEM price cap change in July, with that price determined by natural gas prices between mid-Feb and mid-May.

However, mortgage rate increases and gasoline pump price increases will happen quickly.