Oil jumps 3.6% after blasts in the Saudi capital. Nasdaq falls 1.25%, but bonds rally and the 10-year yield eases to 5.231%
Stocks slid, led by technology, as crude surged on reports of blasts in the Saudi capital. Yet the Treasury's 30-year auction drew solid demand, and the 10-year yield fell 4.6 basis points to 5.231%.
Oil did the damage on Thursday. Early reports from the Saudi capital described explosions in Riyadh, and the Houthis claimed a new attack on the city's airport; a witness cited by the Associated Press reported an evacuation, and Reuters said Lufthansa and Indian carriers suspended flights to Riyadh. Riyadh has disputed Houthi claims in earlier episodes, and the reports we reviewed did not independently confirm the damage. Crude did not wait. West Texas Intermediate, the U.S. benchmark, or WTI, finished up about 3.6% near $91.5 a barrel, by DailyDrop's close data. NBC reported that Brent, the global benchmark, touched $105 at its peak, a figure we could not reconcile with the settlement. Behind the move sits the larger Iran war: Reuters and The Washington Post report that Tehran is widening attacks around the Strait of Hormuz and vowing to close more shipping routes, and tanker risk is rising with them. Gold edged up 0.2% to about $4,157 an ounce. The backdrop is a war that began Feb. 28 and has kept oil near or above $90 for weeks. On Wednesday Vice President Vance said Iran must cut enrichment in a meaningful way to end it, a softer line than before; Thursday's blasts showed how quickly such hope can fade. Every barrel added to the price lands on inflation, which is why a Gulf headline now moves the Treasury market as much as the oil market.
Stocks followed the oil. The S&P 500 fell 0.47% to 7,765.36 and the Nasdaq dropped 1.25% to 27,193.34. The Dow, which holds fewer technology names, rose 0.10% to 51,231.64. Reuters framed the morning as Wall Street slipping on higher yields and oil, which together stoke inflation fears. By the afternoon the bond market had turned. A 30-year Treasury auction found solid demand, Reuters reported, and the benchmark 10-year yield closed at 5.231%, down 4.6 basis points on the day and well below Wednesday's 24-year intraday high of 5.35%. The relief was partly political. President Trump said again that the United States will not attack Iran before the midterm elections, according to Politico, CBS and The Washington Post, which takes some pressure off crude, although The New York Times reports the Pentagon is still drawing up strike plans. The Fed's minutes this week said another rate hike was likely by year end; September inflation data arrive Oct. 14 and the next Fed meeting is Oct. 28. The week's open question is simple: can bonds keep calming while oil rises? Nasdaq's 1.25% drop was concentrated in large technology shares, the group most sensitive to long-term rates, and it shows why a yield spike hurts them first. A calmer Treasury market limited the damage to the S&P 500, though no index could shake the oil headline for long.