Oil Hits Five-Month High on Gulf Attacks as Fed Hike Bets Fade

Two big forces are pulling on markets at once: an oil shock from the Middle East and shifting bets on the Federal Reserve.

Oil climbs on new attacks

Brent crude touched $112.55 a barrel on Thursday, its highest since May 18, Reuters reported. Prices jumped after Yemen's Houthis struck several targets in Saudi Arabia on Wednesday, including a civilian airport in Dammam and an oil field. Reuters also reported that Saudi Aramco told staff to leave its Dhahran headquarters and work remotely, citing six people familiar with the matter.

"No de-escalation is anticipated until the US midterm elections, which should keep oil prices elevated," PVM Oil analyst Tamas Varga told Reuters.

Rate-hike odds shrink

With oil and inflation running hot, the Fed has been leaning toward tighter policy. But a selloff in AI-linked stocks sent investors into U.S. government bonds. CoinDesk reported the 10-year Treasury yield fell to about 5.02%, and CME FedWatch put the odds of a hike at next week's Fed meeting at 8% as of 10:25 a.m. ET, down from 28% a week earlier.

Why it matters for crypto

Expensive oil can keep inflation sticky, which makes it harder for the Fed to ease. That has tended to weigh on bitcoin and other risk assets, and both stocks and crypto fell Thursday morning. Lower bond yields could ease some of that pressure. The Fed's next decision is due on Oct. 28, and traders will watch it, along with oil, to judge where crypto goes next.