Brent crude oil prices surged to their highest level since May on Thursday amid escalating conflict in the Middle East, raising concerns about disruptions to the global supply of crude. The price for a barrel of Brent crude, the international benchmark, climbed 7 percent to close at $100.69, reaching an intraday peak of $102. This marks a significant increase from just weeks ago when prices had fallen below $72 per barrel, near pre-conflict levels prior to recent hostilities involving the United States, Israel, and Iran.

The latest rise in oil prices was triggered by attacks on two Saudi oil tankers in the Red Sea, a key route for Middle Eastern oil shipments. These incidents add risks to another critical passage alongside the Strait of Hormuz, through which a substantial portion of the world’s crude is transported. In response, U.S. President Donald Trump warned of “major military punishment” against the Iran-backed Houthi rebels in Yemen if such attacks persist.

The spike in energy costs is intensifying inflationary pressures at a time when inflation had begun to ease more than expected. This could prompt the Federal Reserve and other central banks to consider raising interest rates further to contain inflation, which in turn might dampen economic growth and weigh on equity markets. Expectations for a possible Fed rate hike increased, with markets assigning a 36 percent chance of an increase in the federal funds rate at the upcoming Fed meeting, up from about 12 percent the previous week. Meanwhile, the European Central Bank kept its main rates unchanged.

The 10-year U.S. Treasury yield also rose to 4.69 percent from 4.67 percent, continuing its ascent from 3.97 percent before the start of the Middle East conflict. This rise has contributed to increases in mortgage rates, which are now near their highest levels in almost a year. Gasoline prices in the United States followed suit, averaging $4.09 per gallon, up from $3.93 just a month ago, although still below May’s peak of roughly $4.56.

Wall Street reacted negatively to the rising oil prices and related concerns, resulting in the largest decline for the U.S. stock market in a month. The Standard & Poor’s 500 index fell 1.2 percent, the Dow Jones Industrial Average dropped about 1 percent, and the Nasdaq composite declined 2.2 percent. The S&P 500 is poised for its first back-to-back weekly loss since March.

Companies with significant fuel expenses experienced notable share price drops despite positive earnings reports. American Airlines shares fell 8.4 percent, and Southwest Airlines declined 6.2 percent, both posting better-than-expected quarterly profits but facing investor worries over higher fuel costs. Tesla’s stock tumbled 14.5 percent after reporting weaker quarterly profits than anticipated, amplifying losses due to its large weighting in the S&P 500. Alphabet, one of the few companies with a larger market value than Tesla, also declined 7.1 percent despite reporting strong revenue and profits. Investor concerns centered on Alphabet’s increased capital expenditure plans for artificial intelligence, which nearly doubled to about $45 billion last quarter. CEO Sundar Pichai noted the role of AI in accelerating cloud revenue growth but uncertainty remains over the return on these substantial investments.

Globally, European stock markets also registered losses amid the rising oil prices, with France’s CAC 40 dropping 1.6 percent. In contrast, some Asian markets gained, as South Korea’s Kospi surged 4.4 percent during early trading.