Sept 22 (Reuters) - The British pound traded flat just off a two-month low against the dollar on Tuesday, as traders weighed a report that said Iran had offered to reopen the Strait of Hormuz within seven days.
The disruption of the crucial shipping route has strained global oil supplies and posed a serious challenge for nations such as the UK, which rely on imports.
A sustained resumption of oil flows through the channel could ease pressure on the Bank of England to hike rates, which in turn may limit gains in sterling.
Sterling was largely unchanged at $1.3366, clawing back after dropping to $1.3327 earlier in the session. Against the euro, it was down 0.06% at 85.76 pence .
After rallying on an orderly political transition to Prime Minister Andy Burnham's government, sterling has weakened on fears that investors are expecting too many rate hikes by the BoE.
"The bar to out-hawk broader market pricing appears to us to be particularly high," Goldman Sachs analysts wrote in a note.
The central bank held rates steady at its last meeting, but traders still expect at least one increase this year, according to data compiled by LSEG.
"The BoE stands alone among major central banks in holding while inflation accelerates, a divergence that leaves sterling carrying catch-up risk," strategists at Gramercy wrote.
Brent crude futures slipped below $100 and were on track for the fifth consecutive day of declines after Kyodo News reported that Tehran had offered to reopen the Strait of Hormuz within seven days if the US took initial steps toward easing military pressure.
Still, previous diplomatic efforts at peace have made only halting progress, which may leave investors wary.
Reporting by Niket Nishant in Bengaluru; Editing by Alexandra Hudson
Source: Reuters