Brent crude briefly tops $119 per barrel before pulling back, and stocks sink worldwide

The attacks added to fears that fighting may knock out production of oil and gas in the Gulf for a long time, which would mean high prices could last a while and cause inflation to rip higher around the world.

Stock indexes dropped 3.4% in Japan, 2.7% in South Korea, 2.8% in Germany and 2.3% in the United Kingdom. On Wall Street, where trading began after Brent crude’s price pared its big gain and where companies are less reliant on oil from the Gulf, the losses were more modest.

The S&P 500 fell 0.7% and is on track for a fourth straight losing week, which would be its longest such streak in a year. The Dow Jones Industrial Average was down 395 points, or 0.9%, as of 2:34 p.m. Eastern time, and the Nasdaq composite was 0.8% lower.

President Donald Trump and countries around the world have made moves to stem the spike in oil prices, but they’re mostly short-term fixes when markets want to see less risk for oil and gas fields around the Gulf and a clearance of the Strait of Hormuz off Iran’s coast, where a fifth of the world’s oil typically sails.

Worries are so high about oil prices that traders are now even betting on a slim chance that the Federal Reserve may have to hike interest rates this year. It’s a dramatic turnaround from before the war, when traders were betting heavily that the Fed would cut rates multiple times this year.

Cuts to rates would give the economy and prices for investments a boost, and they’re something Trump has angrily been calling for, but they would risk worsening inflation. The Fed on Wednesday decided to hold off on cutting interest rates at its latest meeting, and traders found comments from Chair Jerome Powell discouraging about the possibility for cuts in 2026.

Now, traders are betting on a 8% chance the Fed could hike its main interest rate by the end of the year and a 80% chance that it will at least hold steady, according to data from CME Group. Just a month ago, those same traders were betting on a 74% probability of two or more cuts.

That drove Treasury yields higher, and the two-year Treasury yield touched its highest level since the summer.

The more widely followed 10-year Treasury yield rose to 4.28% from 4.26% late Wednesday, up from just 3.97% before the war with Iran started. Earlier in the day, the Bank of Japan, the European Central Bank and the Bank of England held their own interest rates steady.

Besides the threat of higher inflation, a couple of solid reports on the U.S. economy also helped to lift Treasury yields. One said fewer U.S. workers applied for unemployment benefits last week, when economists were expecting a slight rise. Another said growth for manufacturing in the mid-Atlantic area unexpectedly accelerated.

Higher Treasury yields have already sent rates for mortgages and other kinds of loans upward, and a report on Thursday showed sales of new U.S. homes unexpectedly weakened in January.

Higher Treasury yields also grind down on prices for all kinds of investments, from stocks to crypto to gold. Gold sank 5.9% to settle at $4,605.70 per ounce and touched its lowest price since early February. Silver fell even more and dropped 8.2%.

Stocks of companies that mine such metals fell to some of Wall Street's sharpest losses. Newmont slumped 8.7%, and Freeport-McMoRan fell 4.6%.

Micron Technology fell 3.4% even though it reported a blowout quarter of much higher profit and revenue than analysts expected. It gave back some of its big gain for the year so far, which came into the day at nearly 62% because of a worldwide shortage for computer memory.

Helping to limit Wall Street's losses was Rivian Automotive, which rose 1.2%. It announced a partnership where Uber will invest up to $1.25 billion in the company and expects to buy 10,000 autonomous robotaxis. Uber Technologies fell 1.6%.

AP Business Writers Elaine Kurtenbach, David McHugh and Matt Ott contributed.