Oil prices surged by up to 5% early Thursday, which led to a sharp decline in stock values and an increase in Treasury yields. This spike was attributed to new Iranian attacks in the Strait of Hormuz that disrupted tanker traffic.
By around 9:40 a.m. ET, Brent crude oil futures had climbed 4.3% to $104.54 a barrel, aiming for its highest closing price in weeks. West Texas Intermediate crude also jumped 4.3%, reaching $92.09, following reports that tanker traffic had fallen to a mere sliver of pre-war levels.
Concerns grew among traders as news suggested President Trump might soon order U.S. forces to initiate a large-scale operation in Iran, causing the U.S. 10-year Treasury yield to rise to 5.294%, reversing the downturn from the previous day.
This yield has increased in 10 of the last 12 trading days, nearing a 24-year peak. A worldwide bond sell-off has contributed to the rise in yields globally, fueled by fears of persistent inflation and potential interest rate hikes.
The Dow Jones Industrial Average dropped 95 points, or 0.2%, while the S&P 500 and Nasdaq indices fell by 0.4% and 0.6%, respectively.
Meanwhile, national average gasoline prices stubbornly remained above $4 per gallon amid ongoing tensions with Iran. Diesel prices, critical for transportation and home heating, have skyrocketed past $6 a gallon.
The U.S. had partially re-established traffic in the Persian Gulf, even offering sailors as much as $25,000 for perilous trips, but Tehran responded by intensifying attacks on commercial vessels.
Additionally, producers on the U.S. Gulf Coast were compelled to cut back output due to a strengthening hurricane, further restricting supply and keeping prices high.
Reports suggest that Trump is contemplating whether to resume strikes on Iran as the midterms approach, which could escalate the current fragile situation between Washington and Tehran, likely reigniting concerns about inflation just as voters head to the polls.
In response to the situation, Taylor Rogers, a White House spokesperson, mentioned that the president is committed to lowering gas prices and is taking steps to address temporary disruptions in oil supply.
She highlighted that Trump has taken decisive actions to prevent the Iranian regime from obtaining nuclear capabilities while also striving to enhance American energy independence and reduce costs for families.
However, she did not comment on whether Trump has made a decision regarding the resumption of military strikes.
On Tuesday, only seven commercial vessels managed to navigate through the Strait, the lowest count since July 23, alongside the highest number of attacks on tankers since the war’s commencement, according to data from Kpler.
Analysts noted that crude oil traffic through the strait had declined by 27% from the preceding week’s wartime peak, averaging at least 10.1 million barrels per day, which, while back to its September average, is still only 74% of pre-war levels.
Just a week earlier, daily traffic in the strait averaged fewer than 23 vessels, a stark contrast to the hundreds that transited the waterway before the conflict.
