NEW YORK – U.S. stocks recorded their steepest decline in a month on Thursday as Brent crude oil climbed above $100 per barrel, renewing concerns about inflation and interest rates while sharp losses in major technology companies added to the market’s decline.
The S&P 500 fell 1.2%, while the Dow Jones Industrial Average lost 506.93 points, or 1%. The Nasdaq Composite dropped 2.2%, led lower by steep declines in Tesla and Alphabet, whose large market capitalizations heavily influence the major indexes.
Oil Prices Renew Inflation Concerns
Brent crude, the international benchmark, rose 7% to settle at $100.69 per barrel after briefly climbing above $102, its highest level since May for the most actively traded contract.
According to The Associated Press, the rally followed attacks on two Saudi oil tankers in the Red Sea, heightening concerns over another key shipping route for Middle Eastern crude in addition to the Strait of Hormuz.
President Donald Trump warned of “major military punishment” against the Iran-backed Houthi rebels in Yemen if attacks on commercial shipping continue, underscoring growing geopolitical risks to global energy supplies.
Only weeks earlier, Brent crude had traded below $72 per barrel as hopes grew that tensions involving Iran, the United States and Israel would ease and shipping through the Strait of Hormuz would normalize.
Higher oil prices increase business costs while reducing consumers’ purchasing power, raising concerns that inflation could accelerate after recent signs of easing.
The European Central Bank kept its benchmark interest rates unchanged Thursday.
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Meanwhile, CME Group data showed traders now assign a 36% probability that the U.S. Federal Reserve will raise interest rates at next week’s policy meeting, compared with about 12% a week earlier. If implemented, it would be the Fed’s first rate increase since 2023.
The rise in energy prices also pushed U.S. Treasury yields higher.
The yield on the benchmark 10-year Treasury note rose to 4.69% from 4.67% on Wednesday and has climbed significantly from 3.97% before tensions involving Iran intensified.
Higher Treasury yields have contributed to mortgage rates reaching their highest levels in nearly a year.
According to the American Automobile Association (AAA), the national average price of regular gasoline rose to $4.09 per gallon. Although below the approximately $4.56 peak recorded in May, it was up from about $3.93 one month earlier.
Airline Stocks Decline Despite Strong Earnings
Higher fuel costs weighed heavily on airline shares despite stronger-than-expected financial results.
American Airlines fell 8.4% after reporting quarterly profit above analysts’ expectations, saying higher ticket prices helped offset increased fuel expenses.
Southwest Airlines dropped 6.2% despite also reporting quarterly profit and revenue that exceeded forecasts.
Technology Stocks Add to Market Pressure
Technology companies added further pressure to the broader market.
Tesla plunged 14.5% after reporting quarterly profit below analysts’ expectations, making it one of the largest contributors to the S&P 500’s decline.
Alphabet fell 7.1% despite reporting stronger-than-expected revenue and earnings.
The Google parent increased its full-year capital expenditure forecast after nearly doubling artificial intelligence investment to almost $45 billion from a year earlier.
Chief Executive Officer Sundar Pichai said AI helped drive Google Cloud revenue growth of 82% during the latest quarter, but investors remained cautious about whether rapidly increasing AI spending will ultimately generate sufficient returns.
Investor uncertainty surrounding the profitability of artificial intelligence investments has contributed to heightened volatility across technology stocks in recent weeks.
Global Markets
The selloff extended beyond the United States as higher oil prices weighed on investor sentiment.
European markets closed broadly lower, with France’s CAC 40 declining 1.6%, among the region’s largest losses.
Asian markets had finished mostly higher before the latest jump in oil prices, led by South Korea’s Kospi, which gained 4.4%.
At the closing bell:
- S&P 500: 7,408.30 (−90.66 points)
- Dow Jones Industrial Average: 51,711.65 (−506.93 points)
- Nasdaq Composite: 25,137.69 (−553.21 points)
The day’s trading reflected growing investor concern that rising energy prices, elevated borrowing costs and continued uncertainty over artificial intelligence spending could create additional headwinds for financial markets.
This report is based on reporting by The Associated Press.
