Editorial Team
5 min read
Oil Reaches $100 as Alphabet and Tesla Put AI Spending Back in Focus
U.S. stocks fell as attacks on Saudi tankers added a second threat to Middle East oil flows and earnings from Alphabet and Tesla highlighted the cash demands of the AI buildout. The selloff was concentrated in megacap technology rather than a uniform retreat from equities.
- Brent settled at $100.69 a barrel after attacks on Saudi tankers threatened a second route for Middle East oil exports.
- The S&P 500 fell 1.2% and the Nasdaq Composite 2.2%, with Alphabet and Tesla accounting for much of the technology-sector pressure.
- The signal was a reassessment of capital intensity, not evidence that every part of the stock market—or AI demand—had broken down.
U.S. stocks sold off Thursday as an oil shock and technology earnings converged. Brent crude settled 7% higher at $100.69 a barrel, while the S&P 500 fell 1.2% and the Nasdaq Composite lost 2.2%, the close report said.
The sharper question for technology investors came from Alphabet and Tesla, the first two of the so-called Magnificent Seven to report this earnings season. Alphabet, Google’s parent company, said it would lift planned AI spending by $15 billion to $200 billion for the year, while Tesla, the electric-vehicle company investing in autonomous vehicles and robotics, reported negative free cash flow for the first time in two years. Their shares fell about 7% and 14%, respectively, the market account said.
The day did not prove that AI investment will not pay off. It did show that investors are less willing to treat a larger capital budget as a sufficient answer while cash flow is negative, particularly when higher energy prices could keep inflation and borrowing costs elevated.
An oil shock with two chokepoints
Brent is the international oil benchmark. It rose after Yemen’s Iran-aligned Houthi forces attacked two Saudi oil tankers in the Red Sea, threatening a route used to move Middle Eastern crude to global customers. The Strait of Hormuz was already constrained, so the attacks raised the prospect of disruption at two critical oil arteries rather than one, the report said.
That context tempers the apparent familiarity of a $100 price. Brent had peaked at $126 in April, then dropped below $100 in late May and to $71 at the start of July as ceasefire hopes grew. It began climbing again after the U.S.-Iran memorandum of understanding fell apart and hostilities resumed, the conflict and oil analysis said. The $100 level was therefore well below the earlier wartime peak, but the Red Sea attacks added a new risk to normal oil flows.
Higher crude raises costs for businesses and can reduce consumers’ spending power. It also complicates decisions for the Federal Reserve, the U.S. central bank that sets the federal-funds rate. Traders were pricing a 36% chance of a rate increase at its next meeting, up from nearly 12% a week earlier; the 10-year Treasury yield rose to 4.69% from 4.67% late Wednesday, said. Those are market-implied odds and a single day’s yield move, not a forecast of what the Fed will do.
