Oil prices surged above $100 a barrel on Thursday, sending Wall Street lower and putting Australia’s sharemarket on course for another sharp fall as the conflict with Iran continued to disrupt crude supplies through the Middle East.
Brent crude, the international benchmark, climbed 6.3 per cent to settle at $107.63 a barrel after briefly exceeding $108 for the first time since May. US crude rose 6.7 per cent to $102.48.
The S&P 500 fell 0.6 per cent, heading for a fourth consecutive decline, while the Dow Jones Industrial Average was down 381 points, or 0.7 per cent. The Nasdaq composite dropped 0.6 per cent.
Australian sharemarket futures pointed to a loss of about 1 per cent at the opening bell on Friday, after the ASX 200 fell by the same margin on Thursday. The Australian dollar slipped to around US71.56 cents.
Oil prices deepen inflation fears
The latest jump in crude has intensified fears that higher fuel and transport costs will keep inflation elevated, limiting the scope for central banks to cut interest rates.
US petrol prices have risen to an average of nearly $4.28 a gallon, according to the American Automobile Association, up almost 34 per cent from a year earlier. Higher energy costs are also expected to feed through into the price of goods carried by road.
Figures released on Thursday showed US wholesale inflation accelerating to 5.4 per cent last month, from 4.8 per cent in July. Traders are now pricing in roughly a 73 per cent chance that the Federal Reserve will raise its benchmark interest rate at its meeting on September 15 and 16, compared with 61 per cent the previous day.
The prospect of higher rates pushed the yield on the 10-year US Treasury note up to 4.94 per cent, from 4.83 per cent. The yield was below 4 per cent before the conflict with Iran began.
Rising bond yields can weigh on shares by making relatively safe government debt more attractive to investors. They also increase borrowing costs for households and companies, adding to pressure on the economy.
The Federal Reserve has scheduled its next two-day policy meeting for September 15 and 16. A report due on Friday is expected to show how much of the recent rise in energy and wholesale costs has reached US consumers.
The European Central Bank has also highlighted the inflation risks created by the conflict. In a recent analysis, ECB economists said the rise in eurozone inflation during 2026 had been driven predominantly by energy supply shocks linked to the Middle East conflict and the closure of the Strait of Hormuz.
Companies and housing stocks fall
US homebuilders were among the weakest performers after data showed existing-home sales fell in August to their slowest annual pace in more than a year. Lennar fell 4.3 per cent and KB Home lost 4.2 per cent as higher mortgage rates and house prices deterred potential buyers.
Macy’s shares dropped about 4 per cent despite the retailer reporting better-than-expected quarterly profit and revenue and raising its full-year forecasts. The company warned that economic and geopolitical conditions could affect customers’ willingness to spend.
JetBlue Airways rose 1.1 per cent after saying bookings remained strong and revenue trends were running ahead of its earlier expectations, although it acknowledged that fuel costs were higher than anticipated.
Markets also weakened across Europe and Asia. Hong Kong’s Hang Seng index fell 1.3 per cent, while shares declined across much of the region as investors assessed the prospect of prolonged energy disruption and tighter monetary policy.
