Brent Jumps 3.1% to $116.72 as Supply Fears Mount and U.S. Stocks Fall

Key Facts

Brent crude rose 3.1% to settle at $116.72 a barrel at the close of trading on Friday, October 23, its highest settlement since June 2022, according to the Associated Press. During the session, it reached $117.45, its highest level in nearly six months, according to a Reuters report. Oil rose amid fears of supply disruption after Houthi attacks in Saudi Arabia, while authorities in the UAE reported an oil spill. The rise in crude weighed on U.S. stocks, with the S&P 500 falling 0.5%, the Dow Jones 1.2% and the Nasdaq Composite 0.2%. The S&P 500 and Dow closed lower, with the former posting its second consecutive weekly loss.

The decline extended to most stocks, with nearly three-quarters of S&P 500 constituents falling during the session, according to the Associated Press. But market moves were uneven: energy companies’ shares rose as they benefited from higher crude prices. Chevron gained 2.9% and ConocoPhillips rose 3.6%. By contrast, Caterpillar fell 2.4% and American Express dropped 3.7%. American Express shares fell despite the company reporting quarterly earnings that beat analysts’ expectations, alongside an announcement of major job cuts, its first in about a decade.

Moves in other assets showed the yield on 10-year U.S. Treasury notes rising to 4.99%, from 4.96% at Thursday’s close, according to the Associated Press. U.S. West Texas Intermediate crude settled at $103.27 a barrel, up $3.80, or 3.8%, according to Reuters. Brent ended trading at $116.72, up $3.55, or 3.14%, according to Reuters calculations. EL7 tracking shows the Dow Jones closed at 52,215.16 points on Friday, compared with 52,867.98 at the previous session’s close. The moves reflect oil rising alongside falling stocks and higher yields, on a day when pressure spread to most S&P 500 constituents.

Technology stocks linked to artificial intelligence were among the notable exceptions to the broader decline, with Micron rising 2.5%, Intel 1.7% and Microsoft 0.7%; shares of AMD also gained 1.7%, according to the Associated Press. Angelo Kourkafas of Edward Jones said investors are focusing more closely on AI economics. He added that this includes "the significant upfront costs required to build AI infrastructure, and uncertainty about the timing of returns on those investments." Energy price pressure thus coincided with investors scrutinizing the cost of technology infrastructure spending. Energy shares remained supported by higher oil prices, while technology stocks posted mixed performance in a broadly weaker session.

Supply concerns come as energy routes in the region face security risks, while Aramco CEO Amin Nasser said the East-West pipeline’s capacity had increased from 2 million barrels to 7 million barrels a day. The pipeline provides a route that bypasses the Strait of Hormuz, according to the Associated Press. Separately, Iranian media reported that 7 oil tankers caught fire or were damaged overnight from Wednesday to Thursday in the Strait of Hormuz. The Associated Press carried the Iranian report, which gave no details on casualties or the vessels’ flags. These developments add to regional concerns that coincided with the surge in crude, while Reuters linked the rise in prices to Houthi attacks in Saudi Arabia and fears of disrupted energy flows.

U.S. conventional gasoline inventories fell to 13.710 million barrels in the week ended October 16, from 14.684 million in the previous week, according to Energy Information Administration data released on October 21. This means the data were published on October 21, while the comparison covers the week ended October 16 and the week before it. The inventory decline coincided with higher oil prices, putting domestic supply data among the indicators markets are tracking alongside regional risks. Reuters had linked crude’s rise to supply disruption fears, while UBS analyst Giovanni Staunovo said the prospect of escalation could bring supply disruptions back. He added that volatile oil flows and higher shipping rates had left the market undersupplied.

Attention now turns to the Federal Open Market Committee meeting on October 27 and 28, with a press conference scheduled for October 28, according to the Federal Reserve calendar. The September personal income and spending report, including the personal consumption expenditures price index, is scheduled for release on October 29 at 8:30 a.m. Eastern time, according to the Bureau of Economic Analysis. The Associated Press expects the index to show annual inflation of 3.7% in September, compared with the Federal Reserve’s 2% target. The report is due after the committee meeting, in a week when markets are tracking energy prices and inflation readings. These dates will put rising oil prices and supply developments alongside the monetary policy decision and the pending price data.