The unemployment rate dropped to 4.9 percent in the three months to February, the Office for National Statistics (ONS) said in a statement.

Economists had expected the rate to remain unchanged at a five-year high of 5.2 percent.

The ONS attributed the fall largely to a rise in job inactivity, or people not looking for work.

"Alongside falling unemployment, the number of people not actively seeking work increased, with data suggesting fewer students seeking work alongside their studies," said Liz McKeown, ONS director of economic statistics.

"Regular wage growth has slowed further with growth at its lowest rate in over five years," she added.

Official data last week showed that Britain's economy grew much stronger than expected in February.

However, the war in the Middle East, with its effective closure of the Strait of Hormuz, has sent energy prices soaring, threatening to weigh on economic growth.

"The fall in the unemployment rate suggests that the labour market was starting to stabilise before the Iran war, but the more timely figures imply that won't last," said Ashley Webb, senior UK economist at Capital Economics.

James Smith, developed markets economist at ING bank, said UK unemployment "is likely to rise again as the energy crisis takes its toll on Britain's jobs market".

British businesses also cautioned that the unemployment rate could rise back up again.

"With the cost of employment also high... our latest forecast expects unemployment to hit 5.5 percent this year," said Patrick Milnes, head of people and work at the British Chambers of Commerce.

" The slow-down in wage growth indicates businesses are taking their foot off the gas and the labour market will continue to loosen," he added.