Oil prices surged past $100 a barrel on Thursday as Iran-backed Houthi rebels targeted Red Sea shipping as threats by US President Donald Trump to strike them in return sent equity markets slumping. The international benchmark Brent North Sea oil contract soared seven percent to over the symbolic $100 a barrel level, as the attacks potentially opened a new front in the Middle East war and Trump threatened the Houthis with “major military punishment.” Iran, meanwhile, vowed to continue striking the Gulf region so long as it remains under attack from US strikes. While soaring oil prices generated the most attention, Wall Street stocks endured a downcast session after markets panned earnings reports by Google parent Alphabet and Tesla.
Alphabet finished down 6.9 percent while Tesla sank 14.5 percent as both companies came under scrutiny for massive capital spending drives. Besides angst about spiking oil prices and AI weakness, Wall Street is beginning to worry about seasonal dynamics. Late summer has historically been a weak season for markets.
“The calendar is not great,” said Art Hogan of B. Riley Wealth Management, adding “the tensions with Iran are getting worse, not better.” The Red Sea attacks added to concerns about oil supply at a time when deliveries through the Strait of Hormuz have been severely impaired. Saudi Arabia had been using the Red Sea to export millions of barrels of oil that normally flowed through the Strait of Hormuz, so the closure of that shipping channel would remove more oil from the market.
“If Saudi Arabia is unable to move the additional quantities of crude oil that they redirected already from the Persian Gulf, it means that supply disruption is that much worse for the rest of the world at a time that we continue to draw down our commercial inventories,” said Andy Lipow of Lipow Oil Associates. The prospect of increased oil prices also raises the prospect of higher inflation and interest rate hikes, adding to weak sentiment, analysts said. Sovereign bond yields also rose, putting pressure on government spending around the world.
European Central Bank head Christine Lagarde said the reports of the Houthi attacks were “alarming” but that they came too late to factor into the ECB’s decision on Thursday to hold interest rates steady. Nevertheless, the situation in the Red Sea “is clearly going to have an impact and is having an imp… Oil prices surged more than 6% on Thursday.
Houthis strike tankers in Red Sea; first since Saudi-linked shipping blockade via Bab el-Mandeb The price of Brent crude rose more than 6% on Thursday as the war in the Middle East continues to escalate. Crude oil prices surged past one hundred dollars per barrel amid Middle East tensions.
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