Oil flirts with $100 as Red Sea attacks jolt markets
Brent crude hit $98.82 as Houthi attacks on Red Sea shipping raised fears over a key oil route and fresh inflation pressure.
By Sal Moretti · Money Reporter
3 min read
Oil prices pushed close to $100 a barrel Thursday after Houthi rebels in Yemen claimed attacks on two Saudi oil tankers in the Red Sea, adding fresh pressure to fuel markets already rattled by the widening conflict in the Middle East.
Brent crude, the international benchmark, rose to $98.82 a barrel, up $4.75, or 5.05%, according to oilprice.com. West Texas Intermediate, the U.S. benchmark, climbed to $90.67 a barrel, up $3.84, or 4.42%.
Drivers were already feeling the squeeze. AAA data showed the national average for gasoline reached $4.09 a gallon Thursday, up from $3.94 one week earlier.
A key shipping choke point comes under threat
The Houthis said Wednesday that they struck two Saudi oil tankers in the Red Sea, CBS News reported. The group is based in Yemen and has been described as Iran-backed.
The attacks raised concern around the Bab el-Mandeb Strait, the narrow waterway linking the Red Sea with the Gulf of Aden. Oxford Economics says the strait carries about 7% of the world’s oil supply, making it a vital route for energy shipments and broader sea trade.
Any disruption there can move quickly through oil markets, and Thursday’s jump brought crude close to a level not seen for several weeks. FactSet data cited by CBS News showed the last time global oil prices settled above $100 was May 22.
Fed rate cut hopes take a hit
The oil spike also complicates the Federal Reserve’s next call on interest rates, scheduled for July 29. Higher energy prices can feed inflation, which may make it harder for the central bank to cut rates.
Nigel Green, chief executive of investment firm deVere Group, said in an email that investor hopes for rate cuts later this year looked weaker than they had even a week ago.
CME FedWatch, which uses 30-day Fed Funds futures prices to estimate market expectations for Federal Reserve decisions, showed a 36% probability of a rate increase on July 29. One week earlier, the probability was about 11%, according to the same data.
Treasury yields also moved higher as oil climbed. The 10-year Treasury yield rose to 4.71%, CBS News reported.
Conflict signs widen
The market moves came as the conflict showed other signs of escalation. CBS News reported that the U.S. increased the number of refueling aircraft deployed to Israel.
Open-source flight-tracking data also showed American B-1 bombers leaving the U.K., according to the report. The U.S. has carried out 12 consecutive nights of strikes on targets across Iran, CBS News reported.
For consumers, the market drama has a simple readout: crude is more expensive, gasoline is rising, and traders are reassessing whether the Fed can deliver the rate relief many had expected later this year.
This story draws on original reporting from CBS News.