Oil prices are jumping again Thursday as increased fighting in the Middle East threatens to slow the global flow of crude. Wall Street, meanwhile, is sinking with sharp drops for two of its most influential stocks, Alphabet and Tesla. The S&P 500 dropped 0.8% and may be heading for its first back-to-back weekly loss since March. The Dow Jones Industrial Average was down 363 points, or 0.7%, as of 9:35am Eastern time, and the Nasdaq composite was 1.6% lower, reports the AP. Stocks sank under the pressure of rising oil prices, which raise costs for many businesses and divert their customers' dollars away. The price for a barrel of Brent crude oil, the international standard, climbed 6.1% to $99.78.
Earlier in the morning, it briefly topped $100 and touched its highest price in two months following attacks on two Saudi oil tankers in the Red Sea. The attacks threaten another avenue that oil companies use to transport their crude from the Middle East to customers worldwide, along with the Strait of Hormuz. Underscoring the importance of the sea route for the economy, President Trump threatened "major military punishment" against the Houthi rebels in Yemen, who are backed by Iran, if they keep attacking ships. It was just a few weeks ago that the price for a barrel of Brent had dropped below $72, roughly back to where it was before the United States and Israel attacked Iran, on hopes that the Strait of Hormuz would fully reopen to oil tankers.
The jump in oil prices is threatening to reaccelerate inflation. That in turn could push the Federal Reserve and other central banks to raise interest rates, which would slow economies and undercut prices for stocks and other investments. The yield on the 10-year Treasury rose to 4.70% from 4.67% late Wednesday and from just 3.97% before the war with Iran began. That's a significant increase, and it's already helped bring long-term US mortgage rates to their highest levels in nearly a year.
Stocks of companies with big fuel bills fell to sharp losses on worries about higher expenses. American Airlines lost 9.1% even though it reported a much bigger profit for the spring than analysts expected, something that usually sends a stock's price higher. It raised airfares, which helped it offset its higher fuel prices. Southwest Airlines gave back 4.2%, even though it also reported better profit and revenue for the latest quarter than analysts expected. It wrung more profit out of each $1 of its revenue during the spring, even with higher fuel prices. In stock markets abroad, indexes fell sharply in Europe as oil prices jumped. France's CAC 40 fell 1.7% in one of the larger losses.
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