“Oil prices roared back on Thursday to crack the $100 a barrel mark, an inflation-triggering threshold that threatens to bedevil the U.S. economy while putting pressure on the Republicans ahead of the midterm elections.
As President Trump warned Iran could soon feel "major military punishment," Brent crude, the global gauge, topped $100 a barrel for the first time since May. The U.S. oil price shot up 6.2% to $92.19 a barrel.
Higher energy prices reverberated through markets, stoking a selloff in government bonds that sent the yield on the 10-year Treasury note -- a key barometer for borrowing costs -- to new 18-month highs.
The Dow Jones Industrial Average and S&P 500 both lost around 1% on Thursday, while worries about runaway artificial-intelligence spending by big technology firms dragged the Nasdaq composite down more than 2%.
Mortgage rates rose to their highest level in nearly a year, with the 30-year fixed rate hitting 6.58%. Some economists now predict that a nearly 7% U.S. mortgage rate looms.
The pace of inflation had been cooling in June as energy prices declined during the temporary ceasefire and Americans showed a modestly improved mood about the economy earlier this month.
Now, prices at the pump have made a U-turn. The national average retail price of unleaded gasoline pushed back above $4 a gallon this week, taking a bigger bite out of Americans' wallets.
Diesel prices have been rising even faster than those for gasoline or crude oil. Diesel -- which fuels trucks, construction equipment and farming implements -- tends to have an even greater impact on the economy and inflation when its price rises. The national average retail price was about $5.21 a gallon on Thursday, up 39% from a year ago, according to AAA.
For months, Trump has been frustrated by high oil prices, which his aides privately fear could hurt fellow Republicans in the midterm elections, according to people familiar with the matter.
The president told advisers in June that they needed to pressure gasoline retailers and oil companies to reduce prices, according to people familiar with the matter, and administration officials have discussed various ways they could seek to lower prices, including exerting additional pressure on the energy industry.
The chiefs of the U.S.'s biggest oil companies -- including Chevron, ConocoPhillips and Occidental Petroleum -- are in regular contact with the Trump administration about the upheaval in energy markets, according to people familiar with the matter.
Their attitude in calls with the administration, one of the people said, is essentially: "You can't have it both ways. If there's a war in the Middle East and the Strait of Hormuz is effectively closed, prices are going to be high."
White House spokeswoman Taylor Rogers said, "As the U.S. military degrades the terrorist Iranian regime's ability to attack commercial vessels and disrupt the free flow of energy through the Strait of Hormuz, oil and gas prices will plummet back to pre-conflict levels."
Meanwhile, shares in major air carriers slid on Thursday as American Airlines and Southwest Airlines tempered their guidance for the year to reflect oil prices' march higher. Just three weeks ago, American expected its full-year pretax income to approach $1.5 billion. The company's new forecast that it will break even at the midpoint of its updated guidance range sent shares tumbling more than 8%.
Airlines have passed along much of their added jet fuel costs by raising fares. Passengers have so far been willing to pay more, but that is only offsetting about half of the increase in carriers' fuel bills, executives have said.
Meanwhile, the changing tides of the war are whipsawing entire market sectors.
Energy stocks in the S&P 500 have swung between large gains and losses since fighting began, closely tracking oil prices.
The energy-hungry industrial sector has mostly moved in the opposite direction, though a sharp climb in defense-contractor stocks sent it surging on Thursday.
And moves in the bond market show investors expect oil's surge to drive interest rates higher.
Investors bet on inflation by buying and selling both ordinary U.S. Treasurys and those that hedge the risk of inflation, called Treasury inflation-protected securities, or TIPS. The gap between the yields of the two types of bonds -- known as the break-even rate -- has been relatively steady, suggesting that investors expect annual inflation to average around 2.3% over the next decade.
Still, yields on both types of Treasurys have been rising sharply together, with 10-year TIPS yield hitting its highest level since 2023, according to Tradeweb. The yield on the benchmark 10-year U.S. Treasury note also topped 4.7% Thursday, its highest closing level in 18 months -- before the start of the president's second term.
The moves show investors are concerned that the Federal Reserve will need to raise interest rates -- and keep them higher for longer -- to ensure that inflation remains in check.
"Given what's happened in just recent days with the 10-year Treasury, I think mortgage rates will get closer to 7% in the coming weeks," said Mark Fleming, chief economist at First American.” [1]
1. Oil Roars Past $100, Threatens Economy --- Crude hits levels that could rev inflation, pressuring GOP ahead of midterms. Morenne, Benoit; Sider, Alison; Goldfarb, Sam. Wall Street Journal, Eastern edition; New York, N.Y.. 24 July 2026: A1.