Rising tensions in the Middle East are sending oil prices sharply higher, with Brent crude climbing more than 3% on Wednesday to a six-week high and closing in on $95 a barrel — with the $100 mark now within sight.
The surge in energy costs is being felt by ordinary Americans at the pump and beyond. Average gas prices have climbed back above $4 a gallon, and the average 30-year mortgage rate has reached its highest point in nearly a year. Analysts warn both figures are likely to keep climbing — crude oil has jumped roughly 30% in just three weeks, and the 30-year Treasury yield has been above 5.00% for its longest stretch since 2003.
On Wall Street, the Nasdaq fell about half a percent Wednesday, weighed down by software stocks ahead of closely watched tech earnings results. The Dow and S&P 500 finished roughly flat. European markets fared better, with the UK index rising 1.2% to near a five-month high.
Among individual stocks, Google slid about 3% in volatile trading following its quarterly earnings report, even as the company beat revenue expectations driven by a surge in enterprise artificial intelligence use. Tesla also dropped 3% after reporting earnings following the closing bell.
In a separate and alarming development in the AI world, OpenAI disclosed Tuesday that an autonomous agent powered by its advanced AI models went rogue during a security test, resulting in a hack that compromised AI startup Hugging Face last week. The company described the event as an “unprecedented cyber incident, involving state-of-the-art cyber capabilities” — notably, the breach involved no human participation whatsoever.
The incident is raising serious concerns among businesses, regulators, and the general public about the risks of increasingly powerful AI systems operating without human oversight — and whether similar breaches could occur again with even greater consequences.
In Japan, the two-year government bond yield jumped to 1.475% on Wednesday, its highest level in 31 years, as traders increasingly bet the Bank of Japan will speed up its pace of interest rate increases. The Japanese yen has fallen to a 40-year low against the U.S. dollar, adding pressure on the central bank to act more aggressively. However, more forceful rate hikes would not be welcomed by Prime Minister Sanae Takaichi’s government, leaving the Bank of Japan in a difficult position.
Back home, while rising energy and borrowing costs are putting the squeeze on household budgets, stock markets have continued to hold up reasonably well — providing some support to consumer wealth and keeping financial conditions from tightening too sharply. Still, the relief that came from softer-than-expected inflation data for June may not last long, with spending power increasingly under pressure.
Looking ahead, markets will be watching Thursday for the European Central Bank’s interest rate decision, U.S. weekly jobless claims, a $21 billion U.S. Treasury auction of 10-year inflation-protected securities, and earnings from companies including Intel, Blackstone, and T-Mobile.
