The week ahead 15 June 2026 - Middle East peace deal could reshape debate on the economy
What to watch out for in the UK economy and property market this week.
Assuming the Middle East peace deal announced yesterday does not get derailed in the coming days or weeks, the entire debate on the outlook for the global economy could now change completely.
The price of oil came under pressure last week on reports that peace talks were advancing, and further declines now seem likely as speculative money cashes out and the Strait of Hormuz reopens. However, there have been many warnings that oil and gas supplies from the Persian Gulf will take months to return to normal. Moreover, a lot of the petrol we will use over the summer is to be refined from oil bought on forward contracts in the spring, so the prices at the filling station will not quickly fall. So, inflationary pressures from the war are set to gradually recede over several months.
Nevertheless, there will be some upfront benefits from the deal. Pressure on central banks to hike interest rates have suddenly eased. This is good news on economic growth, and there is a strong likelihood that market interest rates will slide in the coming weeks, making it cheaper for households and businesses to borrow. Also, there is the boost to sentiment from taking a major source of uncertainty off the table, which could result in investment capital that was sitting on the sidelines monitoring events starting to deploy. Property investment could be a popular choice for that capital, given yields are relatively high, particularly for offices.
The peace deal is well timed for the UK economy, given output had started to slow. Last week saw news of a -0.1% month-on-month contraction for UK GDP in April. However, if we look at the underlying data, there were some encouraging bright spots. The information and communication sector achieved growth of 1.1%, while transport and storage expanded by 1.4%, so two key sectors of the UK economy bucked the downwards trend.
Turning to the impact on property, we do not anticipate an immediate rebound, as commercial real estate trading typically sees a lull in activity in July and August as dealmakers take holidays. However, we believe the September ‘return to school’ surge for property markets could be stronger than usual this year, assuming the peace in the Middle East holds.
The big UK economic news story this week will be the Bank of England’s interest rate decision, which is announced on Thursday.
The Bank normally prepares the financial markets for any change in the Base Rate with several hints well in advance. The absence of such preparation suggests there will be no change this week, despite last week’s 25 bps hike by the ECB. Prior to the Middle East peace deal, it was anticipated that at some point this year the Base Rate would have to rise. However, expectations will undergo a rewrite this week, and the financial markets will be eager to hear what the Bank of England governor has to say at the Thursday press conference.
This week’s figures
WEDNESDAY 17 JUNE
UK CPI Inflation, May
2.8% PREVIOUS
3.1% FORECAST
A rise for inflation driven by higher fuel prices is widely expected, but it will be interesting to see how much evidence there is of prices rising in other categories.
THURSDAY 18 June
UK HMRC Payrolls, May
-100k PREVIOUS
-65k FORECAST
The jobs market is facing multiple headwinds, and we believe the uncertain economic backdrop will have caused payrolls to have declined further in May, but not as rapidly as in April.
THURSDAY 18 June
Bank of England Base Rate Decision, June
3.75% PREVIOUS
3.75% FORECAST
A change in the Base Rate is not anticipated at this month’s meeting, and in the light of the weekend’s peace deal, many forecasters will be re-assessing their outlook for the Base Rate this week.
