Oil’s ripple effect
- Oil prices hit their highest levels since mid-May
- Only 10 other four-week, 40%-plus rallies since 1986
- Energy prices can impact both stocks and fixed income
After rallying nearly 4% on Wednesday and more than 7% on Thursday, US crude oil prices found themselves where they hadn’t been in nearly four months—above the headline-grabbing $100 threshold.
While spot oil prices hit their highest level ($102.49) since May 19, October WTI crude oil futures (CLV6) hit a new contract high, rallying above $102.39 during the regular trading session. That left the contract up roughly $12 for the week so far, and nearly 50% higher than it was on July 1, when it closed at a nearly four-month low:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
Meanwhile, global Brent crude oil prices, which crossed the $100 threshold on Wednesday, topped $107 intraday on Thursday.
With inflation and Fed policy in the market spotlight this week, the significance of oil prices can’t be underestimated—in the economy at large as well as in the financial markets. Higher oil prices contribute directly not just to elevated prices at the gas pump, but to potentially higher goods prices across the board, since they drive up shipping and production costs. Those, ultimately, can get passed on to the consumer.
In the markets, inflation concerns can lead to raised expectations for Fed rate hikes, which in turn can weigh on stock-market sentiment. Not surprisingly, stocks pulled back the past two days, although Thursday’s hotter-than-expected Producer Price Index (PPI) inflation reading appeared to contribute to the bearish mood. The market-based probability of a hike at next week’s FOMC meeting climbed to 74% after the PPI report.1
Even before President Trump’s Wednesday comment that energy prices wouldn’t fall until “right after” the midterm elections, Morgan Stanley & Co. analysts noted constrained oil supply and rising demand opened the door for $100-plus oil, and that full recovery of Middle East oil supplies wouldn’t occur until well into 2027.2
Meanwhile, Morgan Stanley Wealth Management strategists noted the recent oil rebound has increasingly pushed stocks and fixed income in the same direction, weakening the traditional portfolio diversification benefits of US Treasuries. Higher energy prices have raised near-term inflation expectations, which have in turn increased expectations for Fed rate hikes and higher Treasury yields. Given this backdrop, they note, a sustained easing of US-Iran tensions that lowers energy-price volatility may be the most direct path to lowering the correlation between stocks and fixed income.3
From a purely price-based perspective, unless prices pull back dramatically today (Friday, September 11), this will mark the second time this year—but only the 11th time since 1986—that US spot crude oil prices have rallied 40% or more in a 10-week span.
About the only conclusion one can draw from that handful of examples is that the market continued to be volatile in the near term: Four weeks later, prices were lower in six of 10 cases, but the decline was less than 5% in four instances. In contrast, the four times prices were higher after four weeks, the market gained more than 8%, and more than 13% in three cases.4
While Morgan Stanley & Co. strategists maintain a 12-month target for the S&P 500 of 8,300, they noted earlier this week that higher oil prices and interest rates remain the main near-term risk for stocks.5 We’re seeing those pressures in action this week, but as we’ve seen before this year, sentiment can change quickly—prices have sometimes dropped as quickly as they’ve rallied. It’s not just a matter of how high oil prices are at a given moment, but how long they stay elevated.
Today’s numbers include (all times ET): Consumer Price Index (8:30 a.m.), preliminary consumer sentiment (10 a.m.).
Today’s earnings include: Kroger (KR).
Note: The Extended Hours Day session has been updated to begin at 4 a.m. ET, Monday through Friday, for most US-listed securities. Eligible symbols can now be traded 4 a.m. to 8 p.m. ET when selecting "EXT (Day Plus Extended Hours)" in the Duration menu. Learn more.
Click here to log on to your account or learn more about E*TRADE's trading platforms, or follow the Company on X (Twitter), @ETRADE, for useful trading and investing insights.
1 CMEGroup.com. FedWatch Tool. 9/10/26.
2 MorganStanley.com. Why Oil Prices Could Rise to $100 Again. 9/4/26.
3 MorganStanley.com. Fixed Income Insights: Resilient Labor Demand and Energy-Driven Inflation Pressure Treasury Yields. 9/9/26.
4 All figures reflect US WTI spot crude oil weekly closing prices, 1986-2026. “10-week span” reflects the percentage price change from the closing price of one week to the closing price 10 weeks later. Supporting document available upon request.
5 MorganStanley.com. Weekly Warm-up: The Signals Through the Noise. 9/8/26.