Brent oil tops $100 as Middle East clashes lift prices and stocks fall

Brent crude surged past $100 a barrel on Thursday after Houthi strikes on two Saudi‑linked vessels, pushing U.S. equities lower as investors brace for higher inflation and scrutinise AI‑related capital spending.

Oil shock and market reaction

The price jump follows Houthi attacks in the Red Sea, which Reuters linked to a reported Iranian‑IRGC flight of senior commanders on July 13 [1]. The strikes revived concerns that the Strait of Hormuz—responsible for roughly 35% of global seaborne crude trade—could face prolonged disruptions. World Bank analysis estimates the conflict cut global oil supply by about 10 million barrels per day, leaving Brent prices more than 50% higher in mid‑April than at the start of the year and projected to average $86 a barrel in 2026, up sharply from $69 in 2025 [2].

The oil surge translated into a broad equity sell‑off. The S&P 500 fell 1.19%, the Nasdaq slipped 2.16%, and the Dow dropped 0.88% [1]. While the market reaction aligns with higher energy costs, analysts note that the inflationary impact of the oil shock could add roughly 0.8 percentage points to global headline inflation, according to BlackRock [3].

AI spending and earnings pressure

Compounding the energy‑driven sell‑off, technology stocks retreated on worries about AI capital intensity. Tesla’s shares tumbled more than 13% and Alphabet’s fell over 7% after both reported negative free‑cash‑flow for the quarter, despite revenue beating expectations [1]. Alphabet raised its 2026 capital‑expenditure outlook to $195‑$205 billion, up from the prior $180‑$190 billion range, while Tesla reaffirmed a $25 billion cap‑ex plan, roughly double year‑over‑year spending [1]. The emergence of lower‑cost, open‑source AI models—particularly from China—has heightened concerns that future AI profitability may be constrained.

What to watch

• Upcoming U.S. and European central‑bank meetings for policy responses to rising inflation pressures.
• The next earnings releases from major AI‑heavy firms, especially those that will disclose cap‑ex spending and free‑cash‑flow trends.
• Any further disruptions in the Strait of Hormuz that could push Brent above the $110‑$115 range projected under a worst‑case supply‑shock scenario [2].

The convergence of geopolitical oil shocks and heightened AI spending underscores a dual‑front risk environment: higher commodity prices may reignite inflation, while tech firms grapple with costly AI investments, leaving market direction contingent on both energy supply developments and corporate spending outcomes.