Global oil prices climbed above $100 a barrel on Thursday as tensions in the Middle East intensified, after Iran-backed Houthi rebels in Yemen stepped up attacks on vessels moving through the Red Sea.
Brent crude, the global oil benchmark, jumped $5.76, or 6.1%, to finish at $100.69 a barrel, according to FactSet data.
The pressure is also showing up at the pump. AAA data shows the national average for gasoline reached $4.09 a gallon on Thursday, rising from $3.94 just one week earlier.
Wall Street moved lower as the spike in energy costs rattled investors. The S&P 500 dropped 91 points, or 1.2%, to close at 7,408, while the Dow Jones Industrial Average fell 507 points, or 1%, ending the session at 51,712. The tech-focused Nasdaq Composite slid 2.2%.
The Houthis said they struck two Saudi oil tankers in the Red Sea on Wednesday, raising fresh concerns about security in the Bab el-Mandeb Strait. The narrow waterway, which links the Red Sea to the Gulf of Aden and serves as a critical trade route, handles roughly 7% of the world’s oil supply, according to Oxford Economics.
The renewed surge in crude prices adds another challenge for the Federal Reserve ahead of its next interest rate decision on July 29. Higher oil prices risk feeding inflation, potentially giving policymakers less room to cut rates and increasing the pressure to hold borrowing costs steady — or even raise them — if price growth accelerates, analysts say.
“Rate cuts investors were counting on for later this year look a lot less certain today than they did even a week ago, and then they were on shaky ground,” Nigel Green, CEO of investment firm deVere Group, said in an email.
Markets are now pricing in a 36% chance that the Fed will lift its benchmark interest rate on July 29, according to CME FedWatch, which tracks 30-day Fed Funds futures to gauge expectations for central bank policy. One week ago, that probability was about 11%.
The war also showed other signs of intensifying, with the U.S. upping the number of refueling aircraft deployed to Israel. Open-source flight-tracking data also showed American B-1 bombers leaving the U.K. The U.S. has launched 12 consecutive nights of strikes on targets across Iran.
MORE STORY: Children Spend Weeks Digging Mother Out of Rubble After Venezuela Earthquake
Treasury yields rose amid higher oil prices, with the 10-year Treasury climbing to 4.71%.
The last time global oil prices settled above $100 was on May 22, data from FactSet shows.
Aimee Picchi
