Oil hits $116 as Middle East clashes spark fears of war

Oil prices surged to a five-month high, with Brent crude hitting $116.24 a barrel ^[2], as fresh attacks in the Strait of Hormuz and escalating tensions in the Middle East rattled global markets. The Iranian Islamic Revolutionary Guard Corps (IRGC) claimed to have struck four vessels in the northern Gulf and three more hit mines near the strait, warning the US of further retaliation ^[1]. In response, the US has ordered non-emergency personnel and family members to evacuate its missions in Saudi Arabia and other regional posts.

Saudi Aramco has instructed staff to work remotely from its Dhahran headquarters, amid fears of escalation ^[1]. The conflict’s shadow looms large: after Iran’s effective block on the Strait of Hormuz earlier this year, oil spiked to $126 a barrel. Though exports have since risen above prewar levels via overland pipelines, the latest incidents have reignited concerns about supply disruptions.

Wall Street reacted sharply, with the Dow Jones falling 702 points ^[2]. The S&P 500 dropped 0.4%, while the Nasdaq saw muted gains after its worst day since June. American Airlines warned it would likely post a loss this year due to 'historic fuel cost pressure', abandoning earlier profit forecasts ^[1].

Adding to market jitters, President Trump accused Iran of fabricating attacks to drive up oil prices ahead of the mid-term elections ^[2]. He also announced a surprise deal with Vladimir Putin allowing Russian diesel to flow to the US, with the tanker Agioi Fanendes now en route to New York ^[3]. The move, which has drawn bipartisan criticism and condemnation from Ukraine, is seen as a bid to lower fuel costs before elections.

Meanwhile, tech stocks remain volatile, with AI cloud provider CoreWeave shedding over 10% in two days ^[2]. Analysts warn that soaring oil prices and sustained high interest rates are keeping inflation and rate hike fears alive ^[3]. The US 10-year Treasury yield rose to 4.994%, while the 30-year yield climbed to 5.317%.

According to one source, Trump has also blamed Ukrainian strikes on Russian oil refineries for soaring fuel prices ^[3], a claim that has not been confirmed by other outlets.