Oil prices surged to a six-week high on Wednesday as renewed hostilities between the US and Iran escalated, threatening critical energy shipping lanes in the Middle East. Brent crude briefly topped $95 a barrel, and closed around $94.07, a 3.4% increase, reaching levels not seen since early June. West Texas Intermediate (WTI) also rose 3.0% to $86.83 a barrel. This sharp increase follows comments from US President Donald Trump threatening more attacks on Iranian infrastructure, and reports of the Strait of Hormuz being closed again after a brief détente. The five-month war has already depleted global stockpiles and fueled inflation worldwide, with further disruptions anticipated if threats from Yemen's Iran-aligned Houthis in the Red Sea materialize. Analysts warn that if both the Strait of Hormuz and Bab el-Mandeb are closed, over a quarter of the world's oil-and-gas supply routes could be disrupted.
The surge in oil prices has reignited concerns about inflation, prompting money markets to increase their bets that the Federal Reserve will raise interest rates by October. World Bank chief economist Indermit Gill warned that escalating hostilities could drive interest rates higher and reduce global growth to as low as 1.3%, down from 2.9% last year. Ed Yardeni, a veteran strategist, also noted that the rupture in the ceasefire between the US and Iran risks accelerating price growth, potentially compelling the Fed to tighten monetary policy. The average price for a gallon of regular gas in the US jumped to $4.06 overnight, threatening higher costs for consumers and businesses alike.
On Wall Street, stock markets exhibited a mixed performance. The Dow Jones Industrial Average edged up 0.1% to 0.3% (depending on the reporting time), while the S&P 500 slipped between 0.1% and 0.3%. The tech-heavy Nasdaq Composite, however, dipped significantly, falling between 0.1% and 0.6% due to weakness in chip shares and a more difficult day for tech stocks overall. Despite these dips, one analyst noted that the market has remained resilient, like "a boxer absorbing punch after punch while refusing to go down." Escalating geopolitical risks and inflation concerns weighed on investor sentiment, with nearly 400 shares in the S&P 500 falling at one point, though the index pared losses later in the day.
