The British labor market is weak and oil prices are rising amid fears related to artificial intelligence

Official data issued on Tuesday showed that the labor market in Britain is still suffering from a weak state, with the number of job vacancies falling to the lowest level in more than 4 years and wage growth stabilizing, days before the Bank of England announced its expected decision on interest rates.

The British Office for National Statistics reported that average weekly wages, excluding bonuses, rose by 3.5 percent during the three months ending last July compared to the same period last year, which is the same percentage expected by economists polled by Reuters.

On the other hand, the number of job vacancies decreased during the three months ending last August to 702 thousand jobs compared to 706 thousand jobs during the period ending last July, recording its lowest level since the three months ending in April 2021.

The Census Bureau indicated that small companies attributed the decline in employment to high labor and operating costs.

The unemployment rate also stabilized at 4.9 percent during the three months ending in July, unchanged from the previous reading.

These data come at a time when the Bank of England is trying to assess whether the rise in energy prices resulting from the Iran war will impede the gradual path of slowing wage growth and the decline of underlying inflationary pressures in the British economy.

On Monday, investors placed a probability of about a third of the chance that the Central Bank would raise interest rates by a quarter of a percentage point during its meeting scheduled for Thursday.

Market expectations indicate that raising interest rates at the Monetary Policy Committee meeting next November seems almost certain, with expectations that another additional increase will be implemented next December.

Oil prices rose by more than 2 percent during trading on Tuesday, with Brent crude exceeding the level of $108 per barrel, with escalating concerns about crude supplies after attacks that targeted energy facilities in Saudi Arabia and kept the “East-West” pipeline out of service.

Brent crude futures rose $2.50, or 2.37 percent, to $108.18 per barrel by 08:13 GMT, while US West Texas Intermediate crude futures rose $2.46, or 2.43 percent, to $103.85.

Concerns about supplies increased after the Iranian-backed Houthi group launched new attacks on Saudi Arabia on Monday, coinciding with Gulf countries postponing scheduled talks with Iran.

Hamad Hussein, chief economist for climate and commodities at Capital Economics, said that the new attacks launched by the Houthis on Saudi Arabia may affect investors’ expectations about the “intensity and duration of the conflict,” which is reflected in oil prices.

Meanwhile, Goldman Sachs said in a note that attacks on oil infrastructure represent an important escalation in the conflict, and raise the possibility of the price of Brent crude exceeding the level of $120 per barrel, based on a scenario in which average oil production in the Gulf region during 2027 remains about 4 million barrels per day below pre-war levels.

In another indication of the disruption in the movement of supplies, the number of ships transporting basic goods that crossed the Strait of Hormuz decreased to four ships on Monday, compared to 10 ships the previous day, according to preliminary data from Kpler Company.

About a fifth of the world's oil supplies passed through the Strait before the outbreak of the American-Israeli war on Iran on February 28.

Investors are showing increasing caution about the rise led by artificial intelligence in stock markets, after a number of sector leaders called for curbing the pace of development of this technology, although some observers believe that establishing regulatory controls may ultimately be in the interest of the industry.

These concerns came after a series of warnings that addressed the potential dangers of artificial intelligence to humanity, followed over the weekend by calls from prominent figures in the sector, including Anthropic CEO Dario Amodei, to slow the pace of development and allow more time to address the risks associated with this technology, according to Reuters.

The huge spending of giant technology companies on building artificial intelligence data centers has supported the shares of a large number of companies, and has contributed to the Standard & Poor's 500 index doubling more than twice since the start of the bull market in October 2022. However, investors are closely monitoring any indications of a possible slowdown in this spending, which is expected to approach $800 billion in 2026.

“It will become a worrying issue if we start to see cancellations of orders or a halt in data center construction projects,” said Chuck Carlson, CEO of Horizon Investment Services in Indiana. “What I need is concrete evidence of an actual slowdown, not just talk or predictions.”

He added that any forced cessation in the activity of OpenAI and Anthropic, two of the most prominent developers of artificial intelligence, may raise questions about their market valuations, especially with expectations that they will offer shares for public subscription in the future. He explained that shareholders will demand that these companies continue to achieve growth once they become listed companies in the markets.

AI infrastructure stocks are under pressure

The Standard & Poor's 500 index has achieved gains of more than 11 percent since the beginning of the year, supported by corporate profit growth resulting from a wave of intensive spending in recent years.

Bank of America Global Research expects that giant technology companies - such as Microsoft, Alphabet, Amazon, Meta, and Oracle - will spend about $795 billion on capital expenditures this year, rising to nearly $1.08 trillion by 2027.

A large portion of these investments goes to semiconductor companies, whose shares and profits have seen strong rises this year, but which were most affected by the wave of selling on Monday. Despite this, the Philadelphia Semiconductor Index is still up by about 60 percent since the beginning of 2026.

“Markets are punishing AI infrastructure companies more than giant companies, because they are the most exposed to any slowdown in the pace of development of technical capabilities,” said Eric Kratz, chief investment officer and partner in wealth management at Arena Private Wealth in Chicago.

However, Kratz sees a silver lining in increased scrutiny of safety standards within the sector, noting that “infrastructure expansion will not stop just because CEOs demand regulatory controls. Rather, a reliable safety framework may make financing long-term investments easier.”

Uncertainties deepen risks for stocks

Recent developments reminded some investors of the turmoil that markets witnessed in early 2025 following the emergence of the Chinese artificial intelligence model “Deep Sec,” which at the time raised doubts about the size of future spending on artificial intelligence infrastructure, before it later became clear that the wave of selling was short-lived.

But investors today face a broader set of risks, including the possibility of tightening government oversight of the sector, although US President Donald Trump said on Monday that concerns about the safety of artificial intelligence are “exaggerated” and downplayed the need to impose additional regulations.

“The real danger is not the slowdown in development itself, but rather the regulatory overreach that may hinder the sector,” Kratz said.

For his part, Michael Brun, co-head of direct investment at Goldman Sachs Alternatives, explained that investors are trying to evaluate several influencing factors, including the level of government regulation, geopolitical tensions, and the possibility of the emergence of new models or technologies that may change the rules of the game.

Despite this, Brun stressed that he still sees attractive investment opportunities in “the heart of the artificial intelligence system.”

Uncertainties threaten stock gains

Analysts believe that any decline in confidence in the artificial intelligence sector may make stocks more fragile, especially since the Standard & Poor's 500 and Nasdaq indices are only about 2 percent away from their record levels, at a time when markets are facing rising bond yields, rising oil prices, and the possibility of the Federal Reserve raising interest rates this week to curb inflation.

“Semiconductor and AI infrastructure stocks have already priced in the capital spending boom to continue uninterrupted, leaving almost no margin for error if limits on the pace of development are imposed,” said James Humphreys, managing partner at Mindset Wealth Management.

He added that the markets are already facing inflation that is more stable than expected and an unclear path for interest rates, warning that slowing the main engine of growth in the market may leave the main indicators exposed to increasing macroeconomic pressures.