Brent crude at $108 fueled expectations of a Fed rate hike. U.S. stocks fell

Major U.S. stock indices closed lower on September 10, while Treasury yields once again reached multi-year highs. The sell-off in stocks and government bonds was triggered by another rise in oil prices, while the latest U.S. inflation data—against the backdrop of rising energy costs—reinforced traders’ expectations of an imminent interest rate hike by the Fed, Bloomberg reports.

The price of November Brent crude oil futures jumped more than 6% on Thursday, rising above $108 per barrel. By the close of trading in the U.S., it had stabilized at $107.9. U.S. WTI for next month’s delivery also rose nearly 7% from the previous day’s close, reaching $102.6. Both contracts hit their highest levels since May 19 and recorded their biggest gains in nearly two months, according to Reuters. Market participants reacted to the wave of tit-for-tat strikes between the U.S. and Iran against each other’s ships and forces in the Strait of Hormuz—which had reached its highest level since the start of the war—as well as to increased tensions in Yemen. There, on September 10, Iran-backed Houthis seized control of the Yemeni port of Mocha, which in itself poses an additional threat to shipping in the Red Sea, while tanker traffic through the Strait of Hormuz remains limited, Reuters explains.

Soaring oil prices have pushed up yields on U.S. Treasury bonds, according to Bloomberg—they have once again, as in August, returned to their multi-year highs. Specifically, the yield on 10-year Treasuries reached a nearly three-year high, while the yield on 30-year Treasuries rose to a more than 19-year high, while the yield on 2-year Treasury notes hit a more than two-year high.

Against this backdrop, traders raised their expectations for a Fed rate hike next week to 70%, while major U.S. stock indices fell for the fourth consecutive day. For the broad U.S. stock index, the S&P 500—which lost 0.58% on September 10—this marked its longest losing streak since June. The tech-heavy Nasdaq Composite slipped 0.65% on Thursday, while the blue-chip Dow Jones Industrial Average fell 0.6%.

This article is being updated

This article was AI-translated and verified by a human editor