Brent crude oil prices surged 3.83% to $82.49 a barrel on Thursday, driven by renewed concerns in the Strait of Hormuz region. This increase contributed to fears of inflation and potential interest rate hikes, causing a retreat in equity markets from recent record highs. West Texas Intermediate (WTI) crude also climbed 2.75% to $77.29 a barrel.
Major US stock indices experienced declines. The S&P 500 slipped 0.3% to 7,704.57, while the Dow Jones Industrial Average, which had closed at a record the previous day, was down 0.7% to 53,951. The Nasdaq 100 fell 0.4% to 29,366, and the broader Nasdaq Composite was off 0.06%. In contrast, the Russell 2000 fared slightly better, easing just 0.1% to 3,015. Despite the oil surge, the VIX (volatility index) actually declined by 4.17% to 15.15, suggesting that investors were not broadly seeking hedges against market volatility.
The oil rally resumed as uncertainty around the Strait of Hormuz weighed on global markets. This rebound in oil prices put pressure on US equity markets, with the Dow retreating from its record close and the Nasdaq ending flat. Investors are now looking ahead to key economic data releases, including Friday's payrolls report, consumer inflation data on August 12, and producer price figures on August 13. The Federal Reserve's September rate hike probability has decreased to 58% from 68% on Monday, though a Financial Times report indicated Chair Kevin Warsh is prepared to raise rates if inflation remains high.
Several individual stocks experienced significant losses, including Sandisk NASDAQ:SNDK which slipped 6.8%, Western Digital NASDAQ:WDC which tumbled 13%, AppLovin NASDAQ:APP which dropped 19.7%, and Datadog NASDAQ:DDOG which finished down 19%. Meanwhile, the US 10-year Treasury yield rose 5.1 basis points to 4.668%, and the Dollar Index gained 0.31% to 99.97.
Despite the daily declines, major indices had shown positive performance over the past week, with the S&P 500 and Dow both rising 1.0%, and the Nasdaq advancing 1.6%. The current situation highlights a specific market strain related to oil supply risks rather than widespread selling, as indicated by the falling VIX.
