Global oil prices climbed above $100 a barrel on Thursday as escalating tensions in the Middle East raised concerns over disruptions to crude supplies, while sharp losses in technology giants Tesla and Alphabet pushed US stocks lower.
Brent crude, the international benchmark, surged 7.2 percent to $100.88 per barrel after attacks on two Saudi oil tankers in the Red Sea heightened fears over the security of key shipping routes for global energy supplies.
The latest attacks added to concerns surrounding the Strait of Hormuz, a critical passage for oil exports from the Middle East. In response, US President Donald Trump warned of "major military punishment" against Iran-backed Houthi rebels if attacks on commercial shipping continue.
Rising oil prices weighed heavily on financial markets as investors worried that higher energy costs could fuel inflation, increase business expenses and reduce consumer spending.
The benchmark S&P 500 fell 1.2 percent in late morning trading, while the Dow Jones Industrial Average dropped 477 points, or 0.9 percent. The technology-heavy Nasdaq Composite declined 2.4 percent.
Market analysts said the sharp increase in crude prices has renewed concerns that central banks may delay interest rate cuts or even tighten monetary policy further if inflation accelerates.
The European Central Bank left its key interest rates unchanged on Thursday. However, traders significantly increased expectations that the US Federal Reserve could raise interest rates at its meeting next week, reflecting growing concerns over inflationary pressure from higher energy prices.
The yield on the benchmark 10-year US Treasury note rose to 4.70 percent, continuing an upward trend that has already pushed long-term mortgage rates to their highest level in nearly a year.
Airline stocks came under pressure as investors anticipated higher fuel costs. American Airlines fell 7.4 percent despite reporting quarterly earnings that exceeded analysts' expectations, while Southwest Airlines lost 3.9 percent even after posting stronger-than-expected profit and revenue.
Technology shares also weighed heavily on Wall Street.
Tesla tumbled 13.6 percent after reporting quarterly earnings that missed market expectations, making it one of the biggest drags on the S&P 500.
Alphabet, Google's parent company, declined 7.3 percent despite posting better-than-expected revenue and profit. Investors instead focused on the company's plans to significantly increase spending on artificial intelligence infrastructure after capital investment nearly doubled from a year earlier.
Chief Executive Sundar Pichai said AI-driven demand helped accelerate Google Cloud's revenue growth during the latest quarter, but investors remained cautious about whether the company's massive AI investments would generate sufficient long-term returns.
European markets also ended lower as oil prices surged, with France's CAC 40 among the major indexes posting notable declines. In contrast, Asian markets closed mostly higher earlier in the day, led by South Korea's Kospi, which gained 4.4 percent.