The price of oil surged again Thursday, with Brent crude briefly surpassing $108 per barrel for the first time since May and U.S. crude oil jumping above $102 per barrel, also its highest level since mid-May.
Brent ended the trading session at $107.63 after having soared 6.3% in a day. U.S. West Texas Intermediate (WTI) crude closed at $102.48 per barrel, up 6.7% for the day. WTI’s closing level was also the highest since May.
Since the start of the year, the prices of both Brent and WTI have risen by more than 75%.
“The move reflects a market still pricing in persistent geopolitical risk, with Persian Gulf tensions showing no credible path to de‑escalation,” analysts at ING said Thursday.
As a result of those rising prices, the national average gas price increased by 5 more cents overnight, to $4.27 a gallon. Diesel fuel, which powers everything from farms to trucking to trains, rose 4 cents overnight, to $5.98.
A primary driver of the move in oil prices Thursday was President Donald Trump’s comment in Dallas the day before that he was not looking for a deal with Iran.
Trump also said he did not expect oil prices to fall until “right after” the November midterm elections, despite having said for months that the war would be over quickly.
“Right after the election, oil prices are going to be tumbling downward,” he told reporters Wednesday afternoon. “They’re going to be tumbling down, and we’ll get them down.”
Commodities experts warned this week that oil prices as measured by Brent could rise to $120 or even as high as $150 per barrel if the stalemate with Iran drags on.
Trump’s suggestion that the war could continue for many more months also highlighted the looming crisis in global crude oil supplies.
Dozens of nations agreed this year to release 400 million barrels to keep a lid on prices in the early months of the war.
Nearly six months later, the U.S. Strategic Petroleum Reserve is at its lowest level since the 1980s.
In addition, Saudi Arabia informed OPEC that its crude oil output plunged in August to the lowest level since 1990 as a result of the renewed hostilities with Iran, Bloomberg News reported.
NBC News was not immediately able to confirm that report.
Meanwhile, U.S. Treasury bonds continued to sell off, driving their yields higher. The 10-year Treasury yield, which heavily influences consumer borrowing rates, especially for mortgages, rose as high as 4.95%, its highest since 2023.
The average 30-year fixed mortgage rate rose to 7.07% Thursday, according to Mortgage News Daily. That is the highest rate since May 2025.
The 30-year Treasury yield spiked to 5.36%, its highest level since 2007.
The move in Treasury yields was driven mostly by the soaring price of energy, which has renewed fears of an inflation crisis.
Compounding the turmoil in bond markets were the Treasury Department’s recently announced interventions, which included a buyback of Treasury bonds. Intended to bring yields down by boosting demand, the moves appear to have had the opposite effect.
But rising yields may also be attributable to Trump’s pledge Wednesday night to give a $5,000 “dividend” to all U.S. adults if Republicans retain control of the House and the Senate in November.
Details of the pledge had yet to be released Thursday afternoon, but initial estimates suggest it would cost more than $1 trillion and could add to the country’s massive $40 trillion national debt pile.
On Wall Street, the rises in yields and oil prices sent U.S. stocks tumbling. The S&P 500 and Nasdaq Composite indexes closed lower by 0.6%, while the Dow Jones Industrial Average fell 316 points.
Companies in the information technology sector were among the biggest laggards. The sector includes some of the tech giants most sensitive to interest rates, because of the hundreds of billions being borrowed to build AI data centers. The real estate sector was also one of the poorest-performing.
On Thursday morning, the Bureau of Economic Analysis reported that wholesale business inflation rose 0.4% from June to July. On an annual basis, the producer price index rose 5.4% from a year ago. PPI is often viewed as an early warning signal for what might happen with consumer inflation, which will be released Friday.
The report was also “worrisome” in part because of where in the economy the price increases appeared, said Diane Swonk, chief economist at KPMG.
“They were heavily in diesel and heating fuel,” she wrote on X. “The latter tends to get into other prices with a lag and can be extremely broad based.”
Concerned with inflation, Federal Reserve policymakers will be closely watching the figure to determine whether they should hike U.S. interest rates at their policy meeting next week.
“If inflation comes in hot, I would consider a rate hike,” Federal Reserve governor Christopher Waller said last week.
He also said there remained “considerable uncertainty” over how the Iran war, the Ukraine war and ongoing trade wars would affect the economy.
But Swonk suggested a rate hike now could help prevent even higher inflation that could require a more dramatic hike down the road. “The longer [the Fed] waits, the more it may have to do in the future,” she said.
One bank that decided not to wait was the European Central Bank, which announced higher interest rates for eurozone countries Thursday. It cited inflation as a trigger behind the decision. The decision came just a day after Europe notched its highest average gas prices since 2023.
“The conflict in the Middle East continues to generate inflation pressures, and inflation is set to remain well above target for an extended period,” the ECB’s governing council said in a statement. The ECB also raised its inflation forecast for the next two years because of the energy shock.
European Central Bank President Christine Lagarde told reporters that “extended period” meant at least into “the first half of 2027.”
Lagarde said it was not just the Iran war pushing prices higher, either. “The conflict in the Middle East and recent developments in Russia’s unjustified war against Ukraine have pushed the path of energy prices up further,” she said.
The ECB said, “The outlook remains highly uncertain, with risks to the upside for inflation and to the downside for economic growth.”
After the ECB’s rate decision and the PPI data release, market odds for a Fed rate hike next week rose to about 75%.
Sovereign bond yields around the world are also soaring, with Germany’s 10-year bond reaching a 15-year high Thursday, while 30-year bonds issued by the French government reached highs last seen in 2003.
“If these moves and levels persist, let alone get worse, they will ring alarm bells across most economies,” wrote Mohamed El-Erian, the chief economic adviser at Allianz.
