Market Overview

Brent crude jumped over 6% to $100.69 per barrel Thursday, the first time since late May, as US-Iran hostilities escalated and Houthi militias attacked Saudi oil tankers in the Red Sea (BBC Business, Guardian Business, CNBC). The attacks threaten two critical shipping chokepoints—the Red Sea's Bab al-Mandeb strait and the Strait of Hormuz—through which roughly one-third of seaborne oil flows. Analysts warn Brent could hit $120 or even $146 per barrel in a worst-case regional war scenario, pushing gasoline prices above $4 per gallon in the US and rippling through global supply chains as transport costs rise.

Oil's jump reignited inflation fears, pushing CME FedWatch data showing an 82% probability of a Fed rate increase at the September meeting—up from 53% a week ago (CNBC). The central bank is expected to hold at 3.5%–3.75% at next week's meeting, but even that has a 38% chance of a hike, up from 12%. New jobless claims of 187,000—the lowest since 1969—suggest labor market strength, giving the Fed room to focus on inflation. Higher energy costs threaten to reverse months of falling inflation and force policymakers to keep borrowing costs elevated longer, weighing on mortgages and corporate debt.

Alphabet shares fell 7.1% and Tesla crashed 14% after both companies reported negative free cash flow and signaled massive capital spending plans (CNBC, BBC Business). Alphabet raised its 2026 capex forecast to $195–$205 billion (up from $180–$190 billion), with most funding AI infrastructure; Tesla flagged spending over $25 billion this year, more than double 2025. Investors worry the AI boom has entered a phase where companies are burning cash faster than they can prove returns, threatening profit margins. The tech-heavy Nasdaq dropped 2%, amplifying broader market nervousness around whether trillion-dollar AI bets will ever pay off.