Oil Prices And Treasury Yields Kept Climbing. Stocks Fell Again.

Stocks fell again on Thursday as oil prices and Treasury yields kept climbing amid escalating threats for the global economy.

The S&P 500 decreased 0.58%, while the Dow Jones Industrial Average did so 0.60%. The tech-heavy Nasdaq Composite underperformed, declining 0.65%.

Treasury yields, in turn, climbed, with the benchmark 10-year topping 4.96%. Oil prices also soared, particularly after Iran-backed Houthi rebels took the port city of Mokha from the internationally recognized government on Thursday, potentially threatening traffic through the Red Sea.

Brent crude, the international benchmark, gained almost 7% at 4:08 p.m. ET, topping $108 per barrel.

Mokha is some 50 miles from the Bab el-Mandeb Strait, a key waterway through which more than 12% of global oil transits, and to which several Gulf countries have resorted as the Strait of Hormuz remains largely closed as a result of the war between the U.S. and Iran.

The Associated Press noted that the win is the largest for the Houthis since a 2022 truce that ended the civil war in the country.

Reuters also reported that Pakistan conveyed a warning from Saudi Arabia to Iran, with Riyadh calling on Tehran to rein in on the group to prevent the crisis from escalating further.

Saudi Arabia backs the government has been launching strikes against the Houthis, which in turn have recently imposed an embargo on oil from the country transiting through the Red Sea. The Houthis have also struck energy infrastructure across the country.

Energy prices had also risen following a report detailed that President Donald Trump and advisors reportedly discussed the war dragging on past the end of his term.

The Wall Street Journal noted that Vice President JD Vance, Secretary of State Marco Rubio and other top officials talked about the possibility that Tehran could continue resisting the blockade imposed by the administration.

The conversation stands at odds with remarks from Trump on Wednesday, when he claimed that he believed "war's going to end immediately after the election because they can't hold out any longer." "Right after the election, oil prices are going to be tumbling downward," he added.

In this context, the European Central Bank hiked rates on Thursday, noting that the war between the U.S. and Iran keeps putting pressure on prices.

The benchmark rate now stands at 2.5% compared to the previous 2.25%. The body noted in a statement that the decision "underscores the Governing Council's commitment to setting monetary policy to ensure that inflation stabilises at its 2% target in the medium term."

The body went on to say that its baseline projections now stand at 3% this year, 2.5% in 2027 and 2.1% in 2028. Core inflation, in turn, is set to be stickier: "the baseline foresees 2.5% in 2026, 2.6% in 2027 and 2.3% in 2028. Compared with June, the baseline projection for inflation in 2026 is unchanged, while it has been revised up for 2027 and 2028," the document says.

The ECB warned that outlooks remain "highly uncertain, with risks to the upside for inflation and to the downside for economic growth."

At the same time, odds of an interest rate hike by the Federal Reserve in next week's meeting climbed sharply. Chances now stand at 71.6%, according to the CME Group's Fed Watch tool, compared to 61.2% on Wednesday.