The Middle East Is Moving Markets. Are your Margins Protected?

Q1 2026: What Moved, and Why It Matters

From a high of 1.3823 in late January to a low of 1.3237 in mid-March, a swing driven in part by the escalating US-Iran conflict, surging oil prices, and the inflation fears that followed. If your agency invoices in US dollars and you converted at the wrong moment this quarter or you had no rate protection in place at all and that movement can cost you money. Not because of anything you did wrong. Simply because of when the payment arrived.

The Problem: Two layers of margin pressure

TRN members told us in the Q1 network review that margin erosion is one of their biggest concerns. Most are focused on pricing pressure from clients and that’s entirely understandable.

But there’s a second squeeze that’s harder to see. Every time a client pays you in a foreign currency, the exchange rate at that moment determines how much you actually receive in sterling. If you have no mechanism to control or predict that rate, your margins are exposed to forces entirely outside your business. For agencies placing talent in overseas markets, that exposure is real and in a quarter like Q1 2026, it’s been particularly pronounced.

Larger Context: What the Iran/US conflict is doing to currency markets

On 28 February 2026, US and Israeli forces struck Iran. What followed was one of the most significant geopolitical shocks to global energy and financial markets in decades.

Brent crude surged, close to a 30% move in under three weeks. The Strait of Hormuz, through which roughly 20% of global oil passes, saw shipping traffic effectively halt as insurers withdrew cover for vessels transiting the region. The ripple effects on currency markets were immediate:

• USD strengthened as a safe-haven asset
• GBP weakened against the dollar as inflationary fears mounted and risk appetite fell
• Emerging market currencies in Asia and LatAm came under additional pressure as their energy import costs surged

For recruitment agencies with revenue in other currencies, this wasn’t just a news story. It was a direct hit to the sterling value of payments already in the pipeline.

The Numbers: What Q1 volatility meant for a real invoice

The table below shows what an USD 80,000 invoice, a US placement fee which would have returned in sterling at Q1’s high and low rates. Both rates occurred within the same quarter.

A difference of £2,558 on a single invoice. Not because of anything your client did. Not because of your pricing. Because of when the rate moved, and whether you had protection in place.

Important to note: Volatility creates opportunity too

FX volatility isn’t always a loss. When GBP weakens against USD, UK agencies billing in dollars receive more sterling per invoice which can temporarily boost margins.

The challenge is that without visibility and a plan, you don’t capture the upside intentionally and you can’t protect against the downside when it comes. Agencies that managed their FX actively in Q1 could have locked in strong rates early in the quarter and been insulated from the March sell-off.

The goal isn’t to predict the market. It’s to stop leaving your margins to chance and experiencing margin erosion outside of your control.

A Potential solution: Forward contracts

A forward contract is a straightforward agreement: you lock in today’s exchange rate for a payment you’re expecting in 30, 60 or 90 days.  That means:

• You know exactly what you’ll receive in GBP before the invoice is even paid
• You’re protected if the rate moves against you; as it did sharply in March 2026
• You can plan, budget and manage cash flow with confidence rather than hoping the rate holds as well as use the contract early

Conclusion

The Middle East conflict isn’t resolved. Oil prices remain elevated. Currency markets are still processing the inflationary implications and that volatility is unlikely to disappear in Q2. You can’t control what happens in the Strait of Hormuz. You can control whether your agency is protected from what it does to your margins.

Privalgo is offering TRN members a free FX exposure review.

We’ll look at:

Which currencies you’re currently exposed to and at what volumes

• What the recent volatility has cost you or could cost you going forward
• What rate protection options are available and how they’d work for your specific situation

Further Reading

FX volatility: What causes currency appreciation and depreciation