Oil prices and stocks: Brent above $100 forces war risk back into markets

Oil prices and stocks moved back onto the same screen Thursday as U.S. equities fell after Brent crude climbed above $100 per barrel, CNBC reported. For retail investors, the move ties a geopolitical shock to two market pressures that hit portfolios directly: higher energy costs can feed inflation, and higher bond yields can weigh on stock valuations.

The pressure followed reports of tanker attacks off the coast of Saudi Arabia and continued U.S. military action against Iran. Reuters reported that the U.S. carried out strikes against Iran for a 12th consecutive night.

CNBC reported that the 10-year Treasury yield moved above 4.7%, its highest level since January 2025, while the 30-year yield stood firmly above 5%. A Treasury yield is the interest rate investors demand to hold U.S. government debt, and it often becomes a reference point for borrowing costs across the economy.

Steve Sosnick, chief strategist at Interactive Brokers, told CNBC that the market was no longer able to look past the combined jump in crude and rates. “These problems became too big to ignore,” Sosnick said. “It’s too hard to ignore $100 oil. It’s too hard to ignore 10-year rates that are above 4.70%. It’s too hard for the stock market to ignore 30-year rates that are solidly above 5%.”

Why does $100 oil hurt stocks?

Higher oil prices can raise costs for companies and households. If gasoline and other energy costs stay elevated, consumers may have less money to spend elsewhere, while the Federal Reserve may face more pressure to keep interest rates high or raise them to fight inflation.

West Texas Intermediate crude futures rose 6% to $92 per barrel, according to CNBC, putting them more than 28% above lows below $70 reached earlier in the month. The S&P 500 was heading for its largest one-day decline in a month and was down about 2% since the latest run of nightly U.S. strikes began on July 12, CNBC reported.

The move revived concerns that had appeared earlier in the year. In March, when the U.S.-Iran war began, the S&P 500 fell more than 7.5% at its low point as oil surged nearly 70%, according to CNBC. Investors at the time worried about stagflation, a mix of stubborn inflation and weak growth, as energy costs threatened to lift prices while cutting into consumer spending.

Markets later recovered after de-escalation announcements between the two countries and renewed investor confidence in artificial intelligence-related stocks, CNBC reported. JPMorgan equity strategists wrote earlier this month that they had argued since the second half of March for buying equity weakness linked to the Iran conflict because an “off-ramp and the eventual deal” were likely in their view.

That view is now being tested. Sameer Samana, senior global market strategist at Wells Fargo Investment Institute, told CNBC that traders need to revisit the economic risks they considered in March, including higher inflation and the effect of more expensive gasoline on consumers. Samana said the renewed conflict is a reason to prepare for a deeper equity pullback.

Rate expectations also shifted. CNBC reported that CME’s FedWatch tool showed the implied chance of a Federal Reserve rate increase next week rising to almost 38%, while odds of a September increase climbed above 80%. A week earlier, those probabilities were about 12% and 53%, respectively.

Michael Tanney, CEO of investment advisory firm Pereon Wealth, told CNBC that the recent oil spike may matter more for headlines than client portfolios in the near term. Tanney said a sustained move above $120 per barrel would be the level where “serious trickle down effects” would appear.

This story draws on original reporting from CNBC.