Oil tops $100 US per barrel, as Tesla and Alphabet drag stocks lower

Brent oil shot to its highest price since May on Thursday as increased fighting in the Middle East threatened to slow the global flow of crude.

At the same time, sharp drops for two of Wall Street’s most influential companies, Alphabet and Tesla, yanked the U.S. stock market lower.

The S&P 500 dropped 1.4 per cent and may be heading for its first back-to-back weekly loss since March. The Dow Jones Industrial Average was down one per cent as of midday, and the Nasdaq composite was 2.6 per cent lower.

Stocks sank under the pressure of rising oil prices, which raise costs for many businesses and divert their customers’ dollars away to pay higher prices for fuel. The price for a barrel of Brent crude oil, the international standard, jumped 7.2 per cent to $100.87 US.

It earlier touched the highest price since May for the most actively traded Brent contract in the market. The cause: attacks on two Saudi oil tankers in the Red Sea. That threatens another avenue that oil companies use to transport their crude from the Middle East to customers worldwide, along with the Strait of Hormuz.

Underscoring the importance of the sea route for the economy, U.S. President Donald Trump threatened “major military punishment” against the Houthi rebels in Yemen, who are backed by Iran, if they keep attacking ships.

It was just a few weeks ago that the price for a barrel of Brent had dropped below $72, roughly back to where it was before the U.S. and Israel attacked Iran, on hopes that the Strait of Hormuz would fully reopen to oil tankers.

The jumps in oil prices are threatening to reaccelerate inflation. That in turn could push central banks to raise interest rates, which would slow economies and undercut prices for stocks and other investments.

Gasoline prices tend to rise with oil prices, and the average price for a litre of gas across Canada was $1.802, according to GasBuddy.com — 1.9 cents above yesterday’s average.

Higher oil prices pushed the yield of the 10-year treasury bond up to 4.7 per cent from 4.67 per cent late Wednesday and from just 3.97 per cent before the war with Iran began.

That’s a significant increase, and it’s already helped bring long-term U.S. mortgage rates to their highest levels in nearly a year.

Stocks of companies with big fuel bills fell to sharp losses on worries about higher expenses.

American Airlines lost 7.8 per cent even though it reported a much bigger profit for the spring than analysts expected, something that usually sends a stock’s price higher. It raised airfares, which helped it offset its higher fuel prices.

WATCH | Houthis strike 2 Saudi tankers:

Global shipping fears widen as Iran-backed Houthis claim strikes on 2 Saudi oil tankers

Yemen’s Iran-backed Houthis have claimed strikes on two Saudi-flagged oil…