The week ahead 16 March 2026 - Middle East war stokes market volatility
What to watch out for in the UK economy and property market this week.
Financial and commodity markets remained volatile last week as the war in the Middle East continued. The International Energy Agency coordinated the release of 400 million barrels of oil from the strategic reserves of the major advanced economies. This is enough to make good the loss of Persian Gulf oil exports for around 20 days, assuming normal levels of fuel consumption. In Asia, some nations have been trying to cut energy use, such as the Philippines introducing a four-day working week for government offices.
Despite these measures, oil prices remained well above pre-war levels, in part due to vague messaging from the White House on how long the conflict will last. Also, there has been little progress on re-opening the Straits of Hormuz for commercial shipping. While some oil is being re-routed to Red Sea ports, until there is significant traffic flowing through the Straits again, the economic outlook remains highly uncertain.
Meanwhile, the latest UK GDP numbers were disappointing with the economy achieving no growth in January. This was down from 0.1% in the preceding month, and well below the consensus forecast of 0.2%. Food and beverage services posted a -2.7% fall in activity, perhaps due to the growing popularity of ‘dry January’. There was also a -2.3% decline for administrative and support services, with recruitment agencies particularly hard hit. This adds to the mounting evidence showing the labour market is in a slowdown.
Under normal circumstances, the poor GDP data would make a Bank of England Base Rate cut a near certainty at its Monetary Policy Committee (MPC) meeting this week. However, due to the war in the Middle East, and the surge in the oil price, we are forecasting the MPC rate setters turn cautious and opt to leave interest rates unchanged.
The US Federal Reserve and the ECB will also hold their policy meetings this week, and our prediction is no change in rates by them either.
Also, out this week is data on the UK labour market, which we believe may have softened further, as firms respond to slow growth in the economy by pausing recruitment.
This week’s figures
THURSDAY 19 March
UK Unemployment Rate, January
5.2% PREVIOUS
5.3% FORECAST
The labour market in our opinion is in the midst of a slowdown, as firms respond to higher employer costs and a weak economy. Consequently, we are forecasting another rise in the unemployment rate.
THURSDAY 19 March
Bank of England Base Rate Decision, March
3.75% PREVIOUS
3.75% FORECAST
Typically, central banks err to the side of caution and try to avoid surprise decisions. So, given the heightened uncertainty at present, we believe the MPC will leave the Base Rate unchanged at this meeting.
