Bank of England expected to leave interest rates on hold as oil and gas prices surge; UK pay growth hits five-year low– business live

This chart shows how UK gas prices have surged over 170p a therm today, as the Iran war has caused prices to more than double since late February.

That jump is likely to drive up household energy bills this summer, unless the Middle East conflict deescalates.

However, prices are still much lower than shortly after Russia’s invasion of Ukraine – when they briefly rose over 500p a therm.

This morning’s surge in oil and gas prices, and the slowdown in UK wage growth, are the main things to watch in the markets today, reports Kathleen Brooks, research director at XTB:

• Brent crude has hit $113 a barrel, one of its highest levels since the conflict began. The escalation in the conflict is spooking the market and futures markets are predicting hefty losses for stocks at the open, as risk sentiment sours. Oil is driving the bus in this market, and where it goes, risk sentiment will follow.

• Nat gas prices are surging once more and are higher by 30% after the attacks on Qatar’s Ras Laffan gas field. This has caused President Donald Trump to call on Israel and Iran to stop targeting energy sites. However, it will take a lot of positive sentiment and news flow to calm energy prices today.

• The UK labour market data was not as bad as feared, the unemployment rate remained steady at 5.2%, and the UK’s labour market was little changed at the start of the year.

• There are signs that businesses are hiring once more, the ONS has reported an increase of 6,000 payrolled workers in January and estimates a further 20,000 payrolled workers were added in February. The vacancy rate is stable, with declines in smaller firms offset by increases in jobs in larger firms. This suggests that the jobs outlook improved at the start of the year compared to the end of 2025.

• The big news is that UK wages retreated to their lowest level in 5 years, with pay growth slowing in both the private and public sectors. This is one bright spot in an otherwise weak outlook for UK inflation. Today’s data continues to support a BOE who is concerned about the outlook for growth. The Middle East conflict continues to dominate, and it will take a major deescalation at this stage to boost market sentiment and bring down energy prices.

UK wage growth was particularly weak once you account for inflation.

Real regular pay (adjusted by the consumer prices index) fell to just 0.5% in November-January. That’s the lowest since May to July 2023.

Annual real total pay growth (using CPI) fell to 0.7% in the quarter.

UK wage growth has slowed to a five-year low, in a worrying sign for workers as the Middle East crisis pushes up energy costs.

Average pay (excluding bonuses) rose by 3.8% per annum in the three months to January, down from 4.1% in October-December 2025, the Office for National Statistics reports.

Annual growth in total pay (including bonuses) slowed to 3.9% in November-January, down from 4.2% a month earlier.

For both pay measures, this is the slowest growth since September to November 2020.

Today’s UK labour market report also shows the unemployment rate remained at a five-year high of 5.2%.

Luke Bartholomew, Deputy Chief Economist at Aberdeen, says:

“With unemployment staying steady at 5.2% and a rare gain in payrolls employment, this report paints a mildly more positive picture of the labour market. And with wage growth softer again, in normal times this would have been a relatively reassuring report for the Bank of England.

But the report feels stale in light of the Iran conflict, and the inflation risks stemming from the large spike in energy prices. So while today’s Bank of England meeting had once looked like the likely point of the next rate cut, instead policy is set to be kept on hold today as policymakers give themselves more time to see how the conflict plays out.

Negative supply shocks are difficult for central banks to navigate as they push up on inflation and down on growth at the same time. The dilemma is especially acute for the BoE right now as UK growth was already weak and inflation expectations were also less well anchored. So while we think the hurdle to returning to rate hikes is very high, further rate cuts may be significantly delayed.”

European gas prices are surging this morning too.

The month-ahead UK wholesale gas price has jumped by 25.5% this morning to 175p a therm, its highest level since August 2022, Reuters points out.

The continental gas price has rocketed too. The “front-month Dutch wholesale gas price” is up over 31% at €71.7 per Megawatt hour, its highest since the end of December 2022.

Traders are reacting to yesterday’s escalation in the Middle East, where Iran attacked the world’s largest liquefied natural gas facility in Qatar after Israel’s attack on its South Pars gasfield, the world’s largest.

In response, Donald Trump has threatened to “massively blow up” South Pars completely if Iran attacks Qatar again:

The oil price is rising rapidly again today, adding to the headache facing central bankers.

Brent crude is up 5.9% at $113.76 a barrel, as tensions escalate in the Middle East.

Israel’s attack on Iran’s giant South Pars gasfield yesterday has shown that the war has escalated, with Iran’s Revolutionary Guards threatening to target oil and gas facilities across the region in response.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

The world’s central bankers are facing a conundrum right now. With the Middle East crisis pushing up energy prices, inflation risks lingering, and economies looking weak, should they cut borrowing costs to support growth or raise them to subdue prices?

Rather than make a choice yet, there’s a strong temptation to wait and see.

And that’s why the Bank of England is expected to leave interest rates on hold at noon, after its latest monetary policy committee meeting.

Before the Iran conflict started, an interest rate cut today was seen as an 80% chance by the money markets. But now, with oil over $100 a barrel, the markets indicate there’s a 97% chance that the BoE leaves interest rates on hold at 3.75% today.

Ajith Nair, CIO of Isio Investment Management, explains:

“Expectations for UK interest rates have shifted materially in recent weeks, with markets now anticipating that the Bank of England will hold rates in March, keeping rates at 3.75%, despite previously pricing in a cut.

The primary driver has been the rise in oil and gas prices linked to the Iran conflict, which has pushed inflation risks higher. This creates a difficult backdrop for both policymakers and investors. In fixed income markets, UK government bonds have already come under pressure at times, with yields rising as rate‑cut expectations have been pared back and, more recently, partly restored. Shorter‑dated bonds are now reflecting a more uncertain path for policy rather than a straightforward easing cycle.

The European Central Bank is also expected to leave interest rates on hold today.

The Bank of Japan has got the ball rolling overnight, by leaving its lending rates unchanged, as the Bank of Canada did yesterday.

Last night, the Federal Reserve left US interest rates on hold, and warned that the “implications of developments in the Middle East for the US economy are uncertain”.

The agenda

• 7am GMT: UK labour force report

• 8.30am GMT: Riksbank interest rate decision

• Noon GMT: Bank of England rates decision

• 1.15pm GMT: European Central Bank interest rate decision

• 1.45m GMT: European Central Bank press conference