Brent Tops $100; Tesla, Alphabet Tumble07/23 15:31

   

   NEW YORK (AP) -- Brent oil shot to its highest price since May after 
increased fighting in the Middle East on Thursday threatened to slow the global 
flow of crude. At the same time, sharp drops for two of Wall Street's most 
influential companies, Alphabet and Tesla, yanked the U.S. stock market to its 
worst loss in a month.

   The S&P 500 fell 1.2% and is on track for its first back-to-back weekly loss 
since March. The Dow Jones Industrial Average dropped 506 points, or 1%, and 
the Nasdaq composite sank 2.2%.

   Stocks fell under the pressure of rising oil prices, which raise costs for 
businesses and erode their customers' ability to spend. The price for a barrel 
of Brent crude oil, the international standard, jumped 7% to settle at $100.69.

   It touched $102 during the day, the highest price since May for the most 
actively traded Brent contract in the market. The cause: attacks on two Saudi 
oil tankers in the Red Sea. That threatens another avenue that oil companies 
use to move their crude from the Middle East to customers worldwide, along with 
the Strait of Hormuz.

   Underscoring the importance of the sea route for the economy, President 
Donald Trump threatened "major military punishment" against the Houthi rebels 
in Yemen, who are backed by Iran, if they keep attacking ships.

   It was just a few weeks ago that Brent had dropped below $72 per barrel, 
roughly back to where it was before the United States and Israel attacked Iran 
to begin their war, on hopes that a wind-down in the war would fully reopen the 
Strait of Hormuz.

   The jumps in oil prices will worsen inflation, just when it had begun to 
decelerate by more than economists expected. That in turn could push the 
Federal Reserve and other central banks to raise interest rates, which would 
slow economies and undercut prices for stocks and other investments.

   The European Central Bank held its main interest rates steady at its meeting 
Thursday. But traders are betting on a 36% chance the Fed will hike the federal 
funds rate at its meeting next week. That's up from the nearly 12% probability 
seen a week ago, according to data from CME Group.

   An increase by the Fed would be the first since 2023.

   Higher oil prices pushed the yield of the 10-year Treasury up to 4.69% from 
4.67% late Wednesday and from just 3.97% before the war with Iran began. That's 
a significant increase, and it's already brought long-term U.S. mortgage rates 
to their highest levels in nearly a year.

   Gasoline prices tend to follow oil prices higher, and a gallon of regular 
costs an average of $4.09 across the United States, according to AAA. That's 
still below highs of roughly $4.56 in May, but it was at just $3.93 a month ago.

   On Wall Street, stocks of companies with big fuel bills fell to sharp losses 
on worries about higher expenses.

   American Airlines fell 8.4% even though it reported a much bigger profit for 
the spring than analysts expected, something that usually sends a stock's price 
higher. It raised airfares, which helped it offset its higher fuel prices, 
during the latest quarter.

   Southwest Airlines lost 6.2%, even though it also reported better profit and 
revenue than analysts expected.

   One of the heaviest weights on the U.S. stock market was Tesla, which 
tumbled 14.5% after Elon Musk's electric-vehicle company reported a weaker 
profit for the latest quarter than analysts expected. Because it's one of the 
largest stocks in the S&P 500 by market value, its stock has more influence on 
the index than nearly every other.

   One of the few that's larger is Alphabet, and its stock fell 7.1% even 
though the parent company of Google delivered stronger profit and revenue than 
analysts expected.

   Investors focused instead on how much Alphabet is planning to spend on 
artificial-intelligence investments. Alphabet raised its forecast for capital 
spending over the full year after its investments last quarter doubled to 
nearly $45 billion from a year earlier.

   CEO Sundar Pichai said AI helped its cloud revenue growth accelerate to 82% 
last quarter, but unease nevertheless remains about whether all the money going 
into AI will pay off in terms of productivity and profits.

   Such worries have been shaking the AI industry broadly in recent weeks, 
leading to big swings for the overall stock market.

   All told, the S&P 500 fell 90.66 points to 7,408.30. The Dow Jones 
Industrial Average dropped 506.93 to 51,711.65, and the Nasdaq composite sank 
553.21 to 25,137.69.

   In stock markets abroad, indexes fell sharply in Europe after oil prices 
jumped. France's CAC 40 dropped 1.6% for one of the larger losses.

   Indexes in Asia were stronger earlier in the day, and South Korea's Kospi 
jumped 4.4%.

   ___

   AP Business Writers Matt Ott and Elaine Kurtenbach contributed to this 
report.

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