Global oil prices climb close to $100 a barrel amid attacks in Red Sea

Global oil prices neared $100 a barrel on Thursday as the conflict in the Middle East escalated, with Iran-backed Houthi rebels in Yemen targeting shipping in the Red Sea.

Brent crude, the international standard, reached $98.82 a barrel, up $4.75, or 5.05%, according to oilprice.com. West Texas Intermediate, the U.S. benchmark, hit $90.67 a barrel, up $3.84, or 4.42%.

Gas prices are also climbing higher, with the national average hitting $4.09 a gallon on Thursday, up from $3.94 a week earlier, AAA data shows.

Houthi rebels claimed they struck two Saudi oil tankers in the Red Sea on Wednesday. The attacks threatened shipping in the Bab el-Mandeb Strait, which carries around 7% of the global oil supply, according to Oxford Economics. The strait, which connects the Red Sea with the Gulf of Aden, is a hub for sea trade.

The surge in oil prices complicates the outlook for the Federal Reserve, which is set to make its next interest rate decision on July 29. Resurgent oil prices threaten to push inflation higher, which could place pressure on the Fed to keep rates steady — or even introduce a hike – to counter rising prices, experts say.

“Rate cuts investors were counting on for later this year look a lot less certain today than they did even a week ago, and then they were on shaky ground,” said Nigel Green, the CEO of investment firm deVere Group, in an email.

There’s now a 36% probability the Fed could increase its benchmark rate on July 29, according to CME FedWatch, which uses 30-day Fed Funds futures prices to estimate the central bank’s interest rate decisions. A week ago, that probability stood at about 11%, its data shows.

The war also showed other signs of intensifying, with the U.S. upping the number of refueling aircraft deployed to Israel. Open-source flight-tracking data also showed American B-1 bombers leaving the U.K. The U.S. has launched 12 consecutive nights of strikes on targets across Iran.

Treasury yields rose amid higher oil prices, with the 10-year Treasury climbing to 4.71%.

The last time global oil prices settled above $100 was on May 22, data from FactSet shows.