Brent Crude Tops $100, 10-Year Treasury Yield Hits 4.71% as Jobless Claims Plunge to 57-Year Low

Mumbai, July 24:: US financial markets faced a confluence of pressures on Thursday as escalating Middle East conflict pushed Brent crude above $100 a barrel for the first time since May, while a stunning drop in weekly jobless claims to 187,000—the lowest level since 1969, reinforced expectations of Federal Reserve rate hikes. The 10-year Treasury yield surged to 4.71%, its highest since January 2025, as bond markets priced in tighter monetary policy. 

Brent Crude Surges 7% to $100.71 on Red Sea Tanker Attacks 

Oil prices climbed sharply on Thursday after Yemen’s Iran-backed Houthi group claimed attacks on two Saudi Arabian oil tankers in the Red Sea, opening a new front in the conflict beyond the Strait of Hormuz. 

Brent crude futures rose $6.64, or 7%, to $100.71 a barrel at 10:52 a.m. ET, exceeding $100 for the first time since late May. The global crude benchmark has risen nearly 40% this month and remained in technically overbought territory for a ninth consecutive day—the first such streak since September 2023. US West Texas Intermediate crude advanced $5.18, or 6%, to $92.01, trading above $90 for the first time since June 11. 

The attacks targeted vessels carrying Saudi oil in the Bab el-Mandeb Strait, with a Saudi news agency confirming one of the two tankers was ablaze after the assault. Iran’s Revolutionary Guards said the Strait of Hormuz was under their control and “completely closed” while US actions continued in the region. Goldman Sachs warned that Brent might exceed $120 a barrel in the fourth quarter if the Strait of Hormuz remains disrupted through 2027. 

The oil surge hit airline stocks, with American Airlines tumbling 8.35% and other carriers declining as fuel costs soared. Energy stocks, however, rallied, with Chevron gaining 0.75% and the broader energy sector rising 1.56% on the S&P 500. Consumer discretionary stocks also faced pressure as higher gasoline prices threatened to reduce household spending power. 

10-Year Treasury Yield Hits 4.71%, 30-Year Reaches 5.19% 

US Treasury yields surged to multi-year highs on Thursday as soaring oil prices and a 57-year low in jobless claims fuelled expectations that the Federal Reserve will need to tighten monetary policy further. 

The yield on the 10-year Treasury note rose 5 basis points to 4.707%, its highest level since January 15, 2025. The 2-year Treasury yield, which more closely tracks short-term Fed policy expectations, climbed more than 4 basis points to 4.343%. The 30-year Treasury bond yield surged to 5.188%, just shy of levels not seen since 2007. 

The bond market selloff was triggered by a double whammy of inflationary pressures: surging energy costs from the Middle East conflict and robust labour market data that gives policymakers room to prioritise inflation control. Government bond yields also moved higher across Asia and Europe, with the UK 10-year yield climbing above 5%. 

The surge in Treasury yields weighed heavily on technology and growth stocks, which are more sensitive to higher discount rates. The Nasdaq Composite plunged 2.15%, with Tesla crashing 14.53% and Alphabet sinking 7.09%. Financial stocks, however, benefited from higher yields, with JPMorgan gaining 0.45% and Bank of America rising 0.52% as net interest margin expectations improved. 

Jobless Claims Plunge to 187,000, Lowest Since September 1969 

Initial jobless claims unexpectedly fell by 22,000 to a seasonally adjusted 187,000 for the week ended July 18, the Labor Department reported Thursday—the lowest level since September 1969. Economists polled by Reuters had forecast claims would edge up to 212,000. 

The number of people on jobless benefit rolls for more than a week, a proxy for hiring, fell to a six-week low of 1.796 million in the week ended July 11. The unemployment rate dipped unexpectedly in June to a one-year low of 4.2%, though economists noted this was partly due to a decline in the workforce rather than a boom in hiring. 

Matthew Martin, senior US economist at Oxford Economics, said: “There may be some seasonal noise in the data, given summer months tend to be noisy, but the extremely low level of claims is hard to ignore and the trend in continued claims remains encouraging”. The US job market has been characterised by an unusual balance between restrained labour supply, modest job creation and limited layoffs. 

The strong labour market data reinforced expectations of Fed rate hikes, pressuring interest-rate-sensitive sectors. Real estate and utilities stocks declined, while cyclical sectors such as industrials and materials showed resilience. The broader market’s reaction was mixed, with the Dow Jones falling 0.97% and the NYSE Composite showing marginal gains as investors rotated into defensive sectors. 

Also Read: How to invest in crude oil

Fed Rate-Hike Odds Jump to 40% for July, 100% by September 

The confluence of surging oil prices and a red-hot labour market has dramatically shifted expectations for Federal Reserve monetary policy. 

Interest rate futures prices reflect a nearly 40% probability that the Federal Reserve will lift rates at its two-day policy meeting next week, up from approximately 10% just one week ago. Rate futures markets reflect near certainty—100% probability—that the Fed will deliver at least one quarter-percentage-point rate hike as soon as September. 

According to CME’s FedWatch tool, the probability of the Fed maintaining its current rate in the 3.50%-to-3.75% range at the July meeting stands at 65.3%, with a 34.7% chance of a 25-basis-point hike. By September, the probability of rates remaining unchanged drops to 22%, while the chance of cumulative hikes of 25 or 50 basis points stands at 54.9% and 23%, respectively. 

Federal Reserve Chairman Kevin Warsh may hope to remain silent about the Fed’s rate plans, but fresh oil and potential tariff shocks are likely to test that resolve when US central bankers gather next week. The Fed is expected to again hold rates steady in the 3.50%-to-3.75% range where they have been since December, but consensus may be harder for Warsh to build with oil prices again rising and some colleagues already laying groundwork for a rate hike. Fed Governor Christopher Waller recently said: “Sternly staring at inflation until it melts before our withering gaze is not an option”. 

The prospect of a July rate hike sparked a broad de-risking across equity markets. The S&P 500 fell 1.22%, with communication services and consumer discretionary sectors leading declines. Defensive sectors such as utilities and healthcare outperformed, with the Dow Jones Utility Average gaining 0.58% as investors sought safe-haven assets. 

Gold Slips 0.6% to $4,103 as Rate-Hike Bets Weigh on Bullion 

Spot gold declined 0.6% to $4,103.39 per ounce by 0713 GMT on Thursday, retreating from a two-week high of $4,165.87 touched in the previous session. The precious metal had rallied over the prior two days as dip-buying supported prices amid geopolitical uncertainty. 

The pullback in gold prices was driven by rising US Treasury yields and a stronger dollar, as surging oil prices reinforced expectations of Federal Reserve rate hikes. Higher bond yields reduce the appeal of non-yielding bullion, while a firmer dollar makes gold more expensive for holders of other currencies. 

US gold futures for August delivery slipped 0.4% to $4,136.8. Despite the day’s decline, gold remains well above its levels from a year ago, with prices up approximately $636 per ounce over the past 12 months. Spot silver also moved higher, gaining 0.3% to trade around $60 per ounce. 

The selloff in precious metals weighed on mining stocks, with gold miners declining across the board. However, the broader market impact was limited as investors focused more on technology and growth stocks. Some defensive rotation into gold-related ETFs was observed, though the overall trend remained negative for the precious metals sector. 

US Dollar Strengthens, Natural Gas Holds Near One-Week High 

The US dollar index, which tracks the greenback against a basket of major currencies, rose 0.3% to 101.44 as the worsening flare-up between Washington and Tehran triggered a rebound in oil prices and fanned inflation fears. The dollar’s gains came as the Japanese yen neared 40-year lows against the US currency. 

US natural gas futures settled at $2.916 per million British thermal units on Thursday, holding near a one-week high. The market was supported by the 6% surge in crude oil driven by Middle East supply fears, alongside a smaller-than-expected weekly storage injection of 32 billion cubic feet. Persistently hot weather forecasts through early August are expected to boost air conditioning use, raising demand outlooks for the Lower 48 states. Tropical Storm Bertha presented minimal threat to major inland production hubs, leaving Gulf Coast liquefied natural gas flows largely unaffected. 

The selloff in precious metals weighed on mining stocks, with gold miners declining across the board. However, the broader market impact was limited as investors focused more on technology and growth stocks. Some defensive rotation into gold-related ETFs was observed, though the overall trend remained negative for the precious metals sector. 

US Mortgage Rates Hit Near One-Year High at 6.58% 

The average 30-year US mortgage rate rose to 6.58%, its highest level in nearly a year, as the surge in 10-year Treasury yields pushed borrowing costs higher for homebuyers. The rise comes as higher oil prices continue to strain household budgets and add pressure to affordability. 

Elevated mortgage rates are reducing purchasing power and discouraging prospective buyers, contributing to sluggish home sales. Even small increases in rates can significantly raise monthly payments, prompting some buyers to delay home purchases. The uptick in rates reflects rising 10-year Treasury yields, driven by inflation concerns linked to surging oil prices and geopolitical tensions. 

Homebuilder stocks came under significant pressure, with the sector declining as higher mortgage rates dampen demand prospects. Real estate investment trusts also faced headwinds, while consumer discretionary stocks were impacted by reduced purchasing power among potential homebuyers. 

Thursday’s data releases and geopolitical developments have significantly reshaped the outlook for US monetary policy. The combination of sub-200,000 jobless claims, Brent crude above $100, and Treasury yields at 2026 peaks has increased the probability of Federal Reserve rate hikes. Markets have fully priced in a September hike, with growing expectations of action as soon as next week. The strong labour market gives the Fed room to prioritise inflation control, while escalating Middle East tensions continue to pressure energy markets and bond yields.  

Source 

• https://www.whitehouse.gov/ 

• https://home.treasury.gov/ 

• https://www.federalreserve.gov/ 

• https://www.dol.gov/ 

• https://www.eia.gov/ 

• https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html 

• https://www.govinfo.gov/