Oil prices climbed past $90 a barrel on 18 August 2026 after a temporary ceasefire between the United States and Iran collapsed, while separate data released the same day showed UK wage growth slowing as households continue to face a squeeze on living costs. Brent crude rose 0.8% to $91.60 a barrel, its highest level since 30 July 2026, and US West Texas Intermediate gained 75 cents to $85.25 a barrel after touching $85.37, its strongest point since 31 July 2026, according to a live business news blog.
The Office for National Statistics reported that total UK earnings growth, including bonuses, eased to 4.1% in the three months to June 2026, down from 4.3% in the three months to May. Economists had predicted a steeper drop to 4%. Regular pay growth, which strips out bonuses, edged up slightly to 3.5% from 3.4%, coming in above the 3.4% consensus forecast among City analysts.
Why are oil prices rising again?
A senior Iranian official told a news agency that Tehran would shift to what was described as a “fully offensive” military posture after negotiations toward a lasting resolution to the Middle East conflict stalled, while Washington confirmed it would not extend the temporary truce. The renewed uncertainty has revived concerns among traders about disruption to energy supplies from the region.
According to a news agency report published on 12 August 2026, tensions surrounding the war and attacks on shipping vessels had already been pushing prices higher in the days before the ceasefire formally ended. A further report from the same agency, dated 14 August 2026, said the United States indicated it could sustain a naval blockade of Iran indefinitely and intensify economic pressure after talks failed to produce progress, a stance that has continued to weigh on market sentiment.
Separately, in its latest monthly oil market report cited by the same agency, the Organization of the Petroleum Exporting Countries trimmed its forecast for global oil demand growth in 2026 to 580,000 barrels per day, a revision that adds a layer of complexity to a market currently more focused on supply risk than on demand trends.
What do the latest UK jobs figures show?
The unemployment rate edged down to 4.9% in the three months to June, from 5% in the prior period, while the number of job vacancies fell by 7,000 to stand at 712,000. Liz McKeown, the ONS director of economic statistics, said the figures pointed to some cooling beneath a headline picture that otherwise looked largely unchanged.
Regular wage growth has remained broadly stable in recent months. However, private sector pay growth has continued to ease, while public sector pay growth remains elevated due to the timing of the latest NHS pay awards.
Separate data referenced by the ONS showed private sector regular pay growth slowing to 2.8%, the weakest rate recorded since October 2020, while public sector pay growth accelerated to 6.1%, a divergence largely attributed to the timing of NHS pay settlements in 2026 compared with the previous year.
An ONS page covering earnings and working hours, last updated on 17 August 2026 ahead of the release, also confirmed that the ratio of vacancies to unemployed people has held steady at 0.4 for several months, a level widely regarded by economists as indicative of subdued demand for labour, according to the statistics agency's earnings and working hours page.
How is the labour market cooling beneath the surface?
Sanjay Raja, chief UK economist at Deutsche Bank, pointed to job vacancies as the clearest gauge of demand for workers, noting that they have continued to slow even as other indicators show tentative signs of stabilisation. He highlighted that redundancies fell to 106,000, the lowest total since July 2025, and that the claimant count jobless rate slipped from 4.4% to 4.3%. He also noted that the underemployment rate dropped from 8.6% in the first quarter of 2026 to 8% in the second quarter, suggesting some improvement in labour market flows.
Put simply, while the labour market may seem stagnant on the surface, there are some signs of stabilisation on the horizon.
Raja added that Tuesday's release was unlikely to shift the thinking of the Bank of England's Monetary Policy Committee, with softness in the headline indicators likely to keep policymakers cautious as attention turns to inflation figures due the following day.
Jake Finney, senior economist at PwC UK, offered a similar assessment, describing the overall tone of the report as calm rather than alarming.
On the face of it, the latest labour market report looks relatively benign. Unemployment, employment and inactivity remain broadly stable, while vacancies edged down but are essentially levelling off. The jobs market remains soft, but it isn't collapsing.
Felix Feather, an economist at the fund manager Aberdeen, struck a more cautious note, pointing to continued signs of softening beneath the stable headline figures.
Today's labour market figures continue to point to a softening UK jobs market. Regular private-sector pay growth, which is closely watched by Bank of England officials, eased to 2.8% from 2.9% previously. Meanwhile, the more timely indication from PAYE payroll data showed employment fell again, this time by 13,000. Broadly, the labour market has been loosening for some time. Hiring activity has softened, vacancies have trended lower, and businesses continue to face a challenging demand environment. This underlines our expectation for the Bank of England to be on hold for the rest of the year. Still, we expect inflation will jump at tomorrow's reading, due to the recent uplift in the energy bill price cap, challenging the impression of domestically generated disinflation reflected in the recent dataflow.
What does this mean for interest rates?
Professor Costas Milas of the Management School at the University of Liverpool said the slowdown in private sector wage growth would offer some reassurance to Bank of England policymakers, though he cautioned that the relief could prove temporary given the continuing gap between public and private sector pay growth.
Bank of England policymakers will be “reassured” that private sector wage growth slowed down to 2.8%. This, however, might only prove short-lived. The problem is that public sector wage growth continues to outpace strongly wage developments in the private sector. Indeed, annual average regular earnings growth was 6.1 per cent for the public sector.
James Smith, developed markets economist for the UK at ING, argued that the cooling jobs market removes any pressure on the Bank of England to raise interest rates, barring an extreme escalation in energy costs stemming from the conflict in the Middle East.
If the UK economy really is picking up speed – as last week's GDP data tentatively hints – then there's little sign of it in the jobs market. Admittedly, just like the growth figures, it really depends on where you look. Government is still actively hiring, a trend we've seen throughout this year. Payroll growth is running at 1.1% on a three-month annualised basis, though we have our doubts over how long this can continue given the more austere plans for public spending coming down the track. In sharp contrast, consumer-facing industries (hospitality and retail) have been consistently shedding jobs, and if anything, the pace of decline is getting worse. That follows ongoing pressure since last year's tax and minimum wage hikes. The remainder of the private sector is flatlining – and apart from last week's more optimistic KPMG/REC hiring survey, most other surveys don't point to any sign of an imminent upturn. That disconnect is clearly visible in wage growth. Pay is rising by 6.1% across government, compared to just 2.8% in the private sector. Admittedly, that latter figure is being slightly depressed by “compositional” effects, something the BoE is keen to point out. Still, the basic story here is that the jobs market is cool. We can see that in the vacancy numbers, which are still gradually falling and are well down on pre-Covid levels. We can see that in the unemployment rate, notwithstanding the latest reliability issues. And crucially for the Bank of England, there is little sign that wage growth is about to turn higher. Barring a severe and persistent spike in energy prices, we think the Bank will keep rates on hold until next spring, before cutting rates at least twice in 2027.
The Bank's own guidance, published on its monetary policy pages, states that inflation across the UK economy currently stands at 2.6%, according to the central bank's interest rate page.
What is the government's response?
Pat McFadden, the UK's work and pensions secretary, welcomed elements of the data, pointing to rising employment and a falling unemployment rate as evidence that government reforms were beginning to take effect.
It's encouraging to see signs of progress in the latest figures, with employment on the up and a continued fall in unemployment rate. We will continue to reform welfare and employment support so that more people can live independently and restore opportunity across the country.
McFadden pointed to changes already made to the benefits system, along with a youth jobs grant designed to encourage businesses to take on younger workers, as part of the government's broader employment strategy.
What are unions saying about job security?
Paul Nowak, general secretary of the Trades Union Congress, used the figures to renew pressure on ministers over the prevalence of zero-hours contracts, arguing that insecure work continues to leave large numbers of people unable to plan their finances.
Exploitative zero-hours contracts are endemic in this country, with more than 1.2 million people stuck not knowing how much they're going to earn each week. That's why the government must deliver on its promise of a right to guaranteed hours for everyone. Employers are addicted to this one-sided flexibility. But the vast majority of insecure workers have struggled to meet their basic living costs because they haven't been offered enough hours – and one in three face a financial hit of at least £3000 a year from cancelled shifts and incurred costs. We need to get young people into work – but it isn't good enough to push them from unemployment into rampant insecurity. No young person benefits from a race to the bottom – they deserve good, secure employment like anyone else. It's time for the government to double down on its plans to make work pay, expand the youth jobs guarantee, and stamp out exploitative zero-hours contracts once and for all.
What happens next?
The next major test for policymakers comes with the ONS's consumer price inflation release covering August 2026, which is scheduled for publication on 15 September 2026, according to the statistics agency's release calendar. Economists including James Smith expect that reading to show a jump in inflation linked to a recent increase in the energy price cap, which could complicate the picture for the Bank of England even as underlying wage pressures ease.
Any decision on interest rates will follow the Bank of England's regular monetary policy schedule, with the central bank's rate-setting committee expected to weigh the latest inflation data alongside the labour market signals from Tuesday's report, according to the Bank's interest rate guidance page.
Elsewhere on the economic calendar, UK private rental and house price data are due at 9.30am, German ZEW confidence figures are expected at 10am, and US housing starts figures for July are scheduled for release at 1.30pm.
Key Facts
- Brent crude rose to $91.60 a barrel and WTI to $85.25 a barrel on 18 August 2026 after the US-Iran ceasefire ended.
- UK total pay growth eased to 4.1% and regular pay growth rose to 3.5% in the three months to June 2026.
- Private sector regular pay growth slowed to 2.8%, its weakest since October 2020, while public sector pay growth hit 6.1%.
- UK unemployment fell to 4.9% and vacancies dropped by 7,000 to 712,000.
- OPEC cut its 2026 global oil demand growth forecast to 580,000 barrels per day.
