The British pound has dropped to its lowest point in three months due to the Middle East conflict, which has increased oil prices and sparked inflation fears. The currency slipped 0.65% against the dollar to $1.3319 and was largely unchanged versus the euro at 87.14 pence. This follows concerns over the UK's economic outlook and domestic political uncertainty. Finance Minister Rachel Reeves stated that the country's economy is expected to grow by 1.1% this year, a weaker than the Office for Budget Responsibility's previous forecast of 1.4% growth for 2026. The Bank of England is predicted to be more sensitive to inflation risks than other central banks, with traders expecting a 22% chance of a rate cut at its meeting later this month.