Data showing UK inflation July 2026 reached 2.9% compounded a difficult morning for markets on Wednesday, as Brent crude climbed toward $92 a barrel for a fourth consecutive session following Donald Trump’s claim over the Strait of Hormuz.
The Office for National Statistics (ONS) put the Consumer Prices Index (CPI) at 2.9% for the 12 months to July 2026, up from 2.6% the previous month. The broader CPIH measure, which includes owner-occupiers’ housing costs, rose to 3.1%, from 2.8% in June.
Housing costs drive UK inflation July 2026 reading higher
On a monthly basis, CPI rose 0.3% in July 2026, against a 0.1% rise in July 2025, according to the ONS bulletin. The housing and household services component was a key driver, posting a 12-month CPI rate of 4.6% in July, up sharply from 1.2% in June 2026.
Clothing and footwear prices fell 0.9% on the month, the ONS July 2026 bulletin noted, describing it as the smallest monthly fall for that category since 2020. The equivalent drop in July 2025 was 1.9%, meaning the clothing sector added less downward pressure than a year earlier.
Services inflation, watched closely by Bank of England policymakers for signals on underlying wage pressures, eased to 3.4%. Core CPI, which strips out energy, food, alcohol and tobacco, held at 2.6%.
For context, the ONS June 2026 bulletin had recorded core CPI at 2.6% and a services rate of 3.6%, itself down from 3.7% in May. The July services reading of 3.4% marks a further step lower, though the headline rate is moving in the opposite direction.
Gilt yields and Brent crude add to market pressure
The 10-year gilt yield rose four basis points on Wednesday morning to above 5%, its highest level since July 2023. UK borrowing costs moved alongside surges in long-term debt costs across the US, Germany and Japan on Tuesday night, as investors responded to elevated inflation, rising government debt levels, and spending on artificial intelligence infrastructure.
Susannah Streeter, Wealth Club‘s chief investment strategist, said: ‘The tech-lite nature of the FTSE is keeping it more insulated from turbulence, with the index flat at the open, but the global nature of the index means it isn’t completely immune when optimism evaporates, especially with inflationary concerns moving front and centre in the UK.’
Oil added its own pressure. Brent crude was approaching $92 as the Strait of Hormuz remained closed to traffic, keeping supply constrained. Trump posted a map on Truth Social showing a large blue circle over the strait, declaring the waterway ‘NEW US territory’. With no indication the route was to reopen, the price move entered a fourth straight session of gains.
The London Stock Exchange‘s FTSE 100 opened broadly flat before miners provided partial support to the index. The combination of elevated energy prices, rising gilt yields, and a fresh inflation print above the Bank of England’s 2% target leaves policymakers with little room to ease monetary policy in the near term.
The next Bank of England rate decision will test whether the services inflation trend holds below 3.4%, or whether the housing-driven acceleration in the headline rate forces a reassessment of the cutting cycle’s pace.
