Middle East Tensions Mount as Markets Eye UK Data

The Middle East situation remains volatile, with no talks scheduled for this week and both sides taking firmer positions. The US is preparing new measures against Iran, but it's unclear what form these will take, given the existing sanctions. Markets are concerned that further action could lead to secondary sanctions on countries supporting Iranian trade, including China.

The Israeli Defence Forces struck targets in Lebanon over the weekend, reportedly killing a Hezbollah commander. This development may strain the ceasefire agreement brokered by the US.

Energy prices are at risk of increasing, with Brent crude testing levels near $90 per barrel and US gasoline prices above $4 per gallon. This could become uncomfortable for the US administration as November's mid-term elections approach.

The UK labour market, CPI, and retail sales figures for July will be in focus this week. The data may not materially undermine the pound, but sterling continues to approach technical resistance levels just above current spot rates.