Brent crude futures breached US$100 a barrel on Wednesday to settle at their highest close since late May after Iran and the U.S. struck tankers in the biggest wave of attacks on shipping since the war began, threatening to worsen the disruption of energy supplies from the Middle East.
Oil’s continued march higher unsettled stock investors, with Wall Street’s major indexes closing lower and the TSX hitting an eight-day low. It also contributed to a further rise in bond yields amid worries about the inflationary impact. Canada’s five-year yield - key to fixed mortgage pricing - hit its highest level since mid-2024.
Front-month Brent crude futures settled up US$3.29, or 3.4%, at US$101.21 a barrel. U.S. West Texas Intermediate crude was up $3.02, or 3.25%, at $96.05 a barrel.
Since late May, oil benchmarks have generally traded well below the US$100-per-barrel psychological threshold, reflecting expectations that the conflict would remain on a low simmer. Optimism rose in particular after the U.S. and Iran came to a temporary agreement to cease attacks, even though a permanent peace deal has not been reached.
That calculus has been shifting with the resumption of strikes. Iran said on Wednesday it had attacked 10 ships near the Strait of Hormuz, and the U.S. sank five Iranian oil tankers, in a sharp escalation of the six-month war.
“The move towards and back above US$100 Brent is reflecting a market that increasingly has to change its view on how long the Middle East crisis will continue to curb supply from the region,” said Ole Hansen, head of commodity strategy at Saxo Bank.
Futures prices are moving closer to physical crude and fuel markets, where the reality of tight supply has been apparent for the bulk of the conflict.
Since the Iran war began on February 28, Brent has surged as high as US$126.41 a barrel, a peak reached on April 30, but it had only briefly touched US$100 a barrel in late July after retreating below that threshold in late May.
Shipping volumes through the Strait of Hormuz remain far below their pre-war peak. That artery was responsible for transiting about one-fifth of the world’s oil and gas supply, making it key to worldwide energy trade.
“The near-term fundamentals have suddenly turned to much tighter supplies, and the back and forth strikes from the U.S. and Iran look to now be a mainstay, with any chance of a peace agreement moving further out in the distance,” said Dennis Kissler, senior vice president of energy trading at BOK Financial.
The attacks once again raised concerns about attempting to use the strait. Six commodity vessels passed through it on Tuesday, down from nine a day earlier and below the 10-day average of about 12, preliminary Kpler shipping data showed.
In the week before a resumption of fighting on August 30, roughly 8 million to 9 million barrels per day had flowed through the strait, double the previous week’s volume, according to Claudio Galimberti, chief economist at Rystad Energy. More recently, flows have fallen below 2 million bpd.
Attacks by Iran-backed Houthis on Saudi energy facilities this week have also set oil installations ablaze, threatening a significant expansion of the conflict. The attacks also threaten crude shipments via the Red Sea, which has been a key alternative route to the Strait of Hormuz.
The U.S. Energy Information Administration raised its oil price forecasts for this year and next year on Wednesday, as global stockpiles fall rapidly under pressure from the loss of Middle Eastern supply due to the war.
In equity markets, the S&P/TSX Composite Index ended down 216.49 points, or 0.6%, at 35,906.56, its third straight day of declines and the lowest closing level since September 1.
Heavily weighted financials lost 1.1%, industrials were down 1.2% and technology ended 2% lower.
Gains for resource shares helped limit the TSX’s decline. Energy added 1% and the materials group, which includes metal mining shares, was up 0.9%.
The S&P 500 declined 0.48% to end the session at 7,636.46 points. The Nasdaq declined 0.64% to 26,253.34 points, while the Dow Jones Industrial Average declined 0.77% to 52,381.02 points.
The S&P 500 is down around 2% from its August 13 record high close, and it remains up about 12% in 2026.
Meta jumped over 6% and limited the S&P 500’s decline after the social media company rolled out a long-touted AI assistant that can autonomously send emails, sell a car or make travel bookings on behalf of users.
Alphabet declined 2.3% after the Google parent said it would invest at least $15.1 billion in AI infrastructure in Finland over the next two years, including a major deal for the supply of nuclear power.
U.S. Producer Price Index data on Thursday and consumer price data on Friday will be in focus for clues on the Federal Reserve’s interest-rate path. Traders are pricing in a 60% chance the Fed will raise interest rates at its policy meeting next week.
Reuters, Globe staff