Oil Prices Top $100 per Barrel as US Stocks Tumble
US stocks experienced a decline on Thursday, as oil prices surged past $100 per barrel. The Dow Jones Industrial Average fell by 316 points, or 0.60%, while the S&P 500 dropped 0.58%. The Nasdaq Composite also declined by 0.65%.
The increase in oil prices was driven by concerns over inflation and disruptions to energy supply routes due to the ongoing US-Iran conflict. West Texas Intermediate crude closed at $102.95 per barrel, marking its highest close since May 19. WTI has gained 52.9% since the Iran war began in late February and is up 78.47% year-to-date.
The rise in oil prices pushed the 10-year Treasury yield above 4.945%, its highest level since at least October 2023. Higher yields can put pressure on equity valuations and increase borrowing costs for companies and consumers. High-beta chip stocks, which have been among the strongest performers during the market rally, came under pressure.
A US producer price report released Thursday showed producer prices increased 0.4% in August, in line with expectations. On an annual basis, PPI rose 5.4%, remaining well above the Federal Reserve's 2% inflation target. The data comes ahead of Friday's consumer price index report, which investors are watching for further clues about the Fed's interest-rate decision.
Fed funds futures were pricing in a 74% probability of a quarter-point rate increase following next week's meeting. Separate data showed traders pricing around a 70% chance of at least a 25-basis-point increase.