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A roller-coaster day for oil prices showed how quickly energy shocks are translating into market expectations, with Brent briefly topping $119 per barrel before easing back and pulling stocks and bonds off their worst levels. Thursday’s swings followed renewed anxiety that fighting in the Middle East could disrupt oil and gas production for an extended period, keeping prices elevated and feeding inflation concerns.
Brent, the international benchmark, started the day by climbing to just above $119 per barrel, compared with about $70 before the war with Iran began. The report tied the jump to intensified attacks by Iran on oil and gas facilities around the Persian Gulf, in response to an Israeli strike on an important Iranian natural gas field.
Those developments worsened fears that long-term production losses could follow, a scenario investors have been watching since the war began nearly three weeks ago. Stock markets in Europe and Asia fell sharply when oil rose early, but the losses narrowed as crude retreated during the trading day.
In Asia, Japan’s benchmark index fell 3.4%, while Germany and South Korea declined 2.8% and 2.7%, respectively. By later trading, oil’s big gains pared back in line with the hour-to-hour volatility that has tracked the war’s shifting outlook.
In the United States, the same pattern appeared in a more muted way because fewer U.S. companies rely directly on Middle East oil and gas, according to the report. The S&P 500 ended down 0.3% after recovering from an early drop of about 1%, and it even turned briefly higher in the last hour.
The Dow Jones Industrial Average fell 203 points, or 0.4%, and the Nasdaq composite closed down 0.3%. The broader tape reflected the day’s volatility: the S&P 500 finished at 6,606.49, the Dow at 46,021.43 and the Nasdaq at 22,090.69.
The movement in yields mirrored the oil swings, with Treasury prices moving in tandem. The report said the two-year Treasury yield rose as high as 3.96% before falling to 3.79%, and it linked the early jump and later retreat to changing expectations for short-term rates.
Oil’s rise also reshaped expectations for Federal Reserve cuts. The report said traders were pulling back bets on rate reductions after prices got high enough to shift pricing, and it cited a turnaround from earlier in the war when markets were betting that the Fed would cut rates multiple times.
The report said the Federal Reserve decided to hold its key interest rate steady at its latest meeting on Wednesday and that investors reacted to Chair Jerome Powell’s comments discouraging cuts in 2026. It also cited CME Group data showing a 73% chance that rates would stay steady this year or even rise, compared with 74% probability only a month earlier that the Fed would cut at least twice.
Outside the U.S., other central banks also held their key rates steady on Thursday, including the Bank of Japan, the European Central Bank and the Bank of England, according to the report. The 10-year U.S. Treasury yield held at 4.26%, above the 3.97% level from before the war with Iran started.
Higher yields have fed through to other parts of the economy, the report said, including upward pressure on borrowing costs and a weaker-than-expected reading on new home sales in January. The day’s rate moves also weighed on assets beyond stocks, with gold falling 5.9% to settle at $4,605.70 per ounce and silver dropping 8.2%.
Within equities, materials tied to metals faced some of the sharpest declines, including Newmont, which slid 6.9%, and Freeport-McMoRan, which fell 3.3%. The report also pointed to Micron Technology dropping 3.8% even after it reported a quarter with higher profit and revenue than analysts expected.
The report said company-specific news and broader market positioning helped limit losses for some stocks. Rivian Automotive rose 3.8% after announcing a partnership in which Uber will invest up to $1.25 billion and expects to buy 10,000 autonomous robotaxis, while Uber Technologies fell 1.7%.
Late Thursday, Israeli Prime Minister Benjamin Netanyahu said his country would hold off on any further attacks on the Iranian gas field at Trump’s request, according to the report. The announcement came as investors continued to weigh how quickly risk could ease, and whether the Strait of Hormuz—through which a fifth of the world’s oil typically sails—could see reduced disruption.
This story has been tracking how the war’s course continues to reprice crude and financial expectations as MSI previously reported.