Brent hits $100 as Middle East conflict and AI spending rattle markets
A surge in oil prices driven by Red Sea attacks and a market reckoning over artificial intelligence investments pushed bond yields higher and equities lower.
Brent crude settled at $100.69 a barrel on Thursday, the first close above $100 since late May, while U.S. equities suffered their worst session in a month. The simultaneous shock of escalating Middle East hostilities and investor anxiety over massive artificial intelligence spending triggered a broad market repricing.
Yemen’s Houthis claimed strikes on two Saudi oil tankers in the Red Sea, threatening a second major shipping chokepoint alongside the Strait of Hormuz. President Donald Trump warned of "major military punishment" against Iran, which the U.S. holds responsible, as American forces concluded a 13th consecutive night of strikes. Congress remained divided on the conflict, with the House voting 214-208 to direct Trump to withdraw forces, while the Senate rejected a similar measure 49-47.
The inflationary fallout from the oil spike rippled through sovereign debt markets. The 10-year Treasury yield climbed more than 4 basis points to roughly 4.7%, its highest level since January 2025, while the 30-year yield held at 5.17% for its longest stretch above that threshold since 2007. European Central Bank president Christine Lagarde warned that the oil rebound poses an upside risk to euro zone inflation, prompting traders to price in a September rate hike despite the bank holding rates steady.
The S&P 500 fell 1.2% and the Nasdaq dropped 2.2%, marking their steepest one-day declines since late June. Alphabet and Tesla led the selloff after signaling increased AI expenditures, contributing to a roughly $500 billion market valuation hit. After-hours trading offered a partial reprieve, with Intel surging over 4% on 25% revenue growth and Oracle gaining on a $7 billion Pentagon contract.
EU regulators fined Google €890 million ($1 billion) under the Digital Markets Act for favoring its own services. On the trade front, the White House will impose new tariffs of 10% to 12.5% on dozens of countries over alleged forced-labor violations just after midnight on Friday. Separately, White House science policy director Michael Kratsios accused Chinese AI firm Moonshot of accessing Nvidia's advanced GB300 chips in Thailand to train its new 2.8-trillion-parameter model, circumventing U.S. export controls.
