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Price action in the coming week will be shaped by geopolitics.

Pound sterling was weaker against the euro and most global peers at the start of the week as geopolitical risks were digested by investors.

GBP/EUR trades on the cusp of 1.14 at the time of writing, but had fallen as low as 1.1380 in earlier Asian trade, as a risk-off tone permeates global markets and sets the agenda for trade in the coming week.

Further losses in pound sterling are likely if the conflict continues, but it will likely recover some of the recent losses in the event of strikes being called off to allow for negotiations.

President Trump told one news outlet at the weekend that Iran's new leadership wants to talk with him and that he plans to do so, suggesting scope for hostilities to end.

"They want to talk, and I have agreed to talk, so I will be talking to them. They should have done it sooner. They should have given what was very practical and easy to do sooner. They waited too long," he said.

Until then, U.S.-Israeli military strikes on Iran, which began on Saturday with the killing of Iran’s supreme leader, Ayatollah Ali Khamenei, are to continue "in full force," said Trump in a separate social media address.

Oil prices frame the global market reaction: brent is trading 7% higher than Friday's close at $78 a barrel as traders focus on the key Strait of Hormuz, which is effectively closed now.

The Strait is a crucial conduit for Middle Eastern oil into global markets.

The British pound has been one of the biggest losers of Middle East geopolitical tensions, largely for the fact that rising oil prices will impact the domestic economy negatively.

Rising oil prices will be felt on Britain's forecourts and will therefore limit the extent to which inflation is expected to fall in the coming weeks, potentially denying the Bank of England a window of opportunity to lower interest rates beyond March.

As Pound Sterling Live expected, the traditional safe-haven currencies of the CHF, USD and JPY have all risen in response to developments in the Middle East.

It is interesting to see the pound is actually struggling against most of its G10 currencies, whereas in previous risk-off episodes, it would typically rise against at least half the basket, which just confirms it to be a real laggard at present.

Those with GBP/EUR payments in the coming days should anticipate further losses in light of ongoing tensions.

Should hostilities end, then a recovery by GBP/EUR is possible.

Above: The 15-minute chart shows much of the damage to GBP/EUR happened on Friday when it became clear the U.S. was preparing a weekend attack. Pound Sterling Live was the only publication covering the price action at the time.

Given that the protagonists are not on the ground in Iran and outright regime change is hardly likely, but there is scope for a new Iranian leadership to engage meaningfully with the U.S.

Also, if Iranian military forces are degraded by strikes, their ability to carry out attacks on neighbouring states and oil infrastructure is reduced. Again, it all comes down to oil for markets.

The Iranian navy has reportedly suffered significant losses, which suggests the Strait of Hormuz will soon see oil flow through it again, which will limit the rise in oil prices.

Domestic developments this week include a Spring Statement by the Chancellor of the Exchequer, but this is likely to be low-key and no major spending or taxation plans are scheduled.