Middle East Tensions Drive Oil Prices Higher
Oil prices surged to $93.01 per barrel due to reports that the US sent its third aircraft carrier to the Middle East, adding up to 10,000 American troops in the region.
The move, combined with China's suspension of oil product exports, fueled concerns about global supply and pushed Brent crude to $102.60 per barrel.
China's decision to halt October fuel exports will reduce diesel supplies worldwide, potentially driving up jet fuel prices even further. The aviation industry has already been affected by high jet fuel costs, with American Airlines (AAL) and Southwest Airlines (LUV) down from July's highs.
The bond market also experienced a mixed day on Thursday, with US bond yields rising initially before losing momentum around noon. The 2-year T-bill closed at 4.81%, while the 10-year T-bill settled at 5.26%. These levels are still below their intraday highs of 4.91% and 5.31%, respectively.
Despite these fluctuations, the bond market's weakness remains a significant risk for stock markets. The strong AI sector is contributing to US GDP growth, which could push the baseline yield for the 10-year and 30-year Treasury bonds to 5.0-5.5%.