US stocks pare their losses as oil prices recede after briefly topping $119 per barrel

NEW YORK (AP) - Stocks pared their losses on Wall Street as an early spike in crude oil prices eased later in the day. The roller-coaster ride for oil prices Thursday underscored how they're dictating where financial markets and maybe even the economy are heading. The S&P 500 fell 0.3% after erasing an earlier drop of 1%. The Dow Jones Industrial Average lost 0.4%, and the Nasdaq composite fell 0.3%. Markets in Europe and Asia had considerably larger losses, when oil prices were higher earlier in the day. If oil prices stay high, the worry is that they could cause inflation to rip higher around the world.

THIS IS A BREAKING NEWS UPDATE. AP's earlier story follows below.

NEW YORK (AP) - A roller-coaster day for oil prices on Thursday showed how tight a grip they have on the economy and stock markets worldwide. Stocks tumbled in Europe and Asia when oil prices shot higher early in the day, but U.S. stocks erased their sharp losses as the day progressed and oil prices fell back.

The morning began as a scary one after Brent crude, the international standard, briefly rose above $119 per barrel, up from roughly $70 before the war with Iran began.

The jump came after Iran intensified attacks on oil and gas facilities around the Persian Gulf in response to an Israeli attack on an important Iranian natural gas field. That worsened fears that the war may knock out production of oil and gas in the Gulf for a long time, which would mean high prices could last a while and cause inflation to rip higher around the world.

Stock indexes dropped 3.4% in Japan 2.8% in Germany and 2.7% in South Korea. But oil prices pared their big gains as the day progressed, the latest in their hour-to-hour swings since the war began.

Brent oil settled at $108.65, up only 1.2% from the day before, and then eased further as trading continued. After briefly topping $101, a barrel of benchmark of benchmark U.S. crude settled at $96.14 and then eased toward $93.

That helped stocks on Wall Street pare their own losses, which were already more modest than in Europe and Asia because U.S. companies are less reliant on oil from the Middle East.

The S&P 500 was down 0.1% in late trading after nearly erasing an earlier drop of 1%. The Dow Jones Industrial Average was down 72 points, or 0.1%, with a little more than a half-hour remaining in trading, and the Nasdaq composite was 0.1% lower.

President Donald Trump and countries around the world have made moves to stem the spike in oil prices, but they're mostly short-term fixes when markets want to see less risk for oil and gas fields around the Gulf and a clearance of the Strait of Hormuz off Iran's coast, where a fifth of the world's oil typically sails. Uncertainty about what will happen has led to severe back-and-forth in the oil and stock markets since the war began nearly three weeks ago.

The yo-yo effect hit the bond market, too, where Treasury yields jumped in the morning with the price of oil and then eased back.

The two-year Treasury yield got as high as 3.96% and touched its highest level since the summer before pulling back to 3.79%. It tends to follow expectations for what the Federal Reserve will do with short-term interest rates.

Worries are so high about oil prices that traders are nixing bets that the Federal Reserve will cut interest rates even once this year. It's a dramatic turnaround from before the war, when traders were betting heavily that the Fed would cut rates multiple times this year.

Cuts to rates would give the economy and prices for investments a boost, and they're something Trump has angrily been calling for, but they would risk worsening inflation. The Fed on Wednesday decided to hold off on cutting interest rates at its latest meeting, and traders found comments from Chair Jerome Powell discouraging about the possibility for cuts in 2026.

Now, traders are betting on a nearly 73% chance that the Fed will hold rates steady this year, according to data from CME Group. Just a month ago, those same traders were betting on a 74% probability of two or more cuts.

The more widely followed 10-year Treasury yield fell 4.25% from 4.26% late Wednesday. But it's still well above its 3.97% level from before the war with Iran started. Earlier in the day, the Bank of Japan, the European Central Bank and the Bank of England held their own interest rates steady.

Higher Treasury yields have already sent rates for mortgages and other kinds of loans upward, and a report on Thursday showed sales of new U.S. homes unexpectedly weakened in January.

Higher Treasury yields also grind down on prices for all kinds of investments, from stocks to crypto to gold. Gold sank 5.9% to settle at $4,605.70 per ounce. Silver fell even more and dropped 8.2%.

Stocks of companies that mine such metals fell to some of Wall Street's sharpest losses. Newmont slumped 8.7%, and Freeport-McMoRan fell 3.5%.

Micron Technology fell 2.7% even though it reported a blowout quarter of much higher profit and revenue than analysts expected. It gave back some of its big gain for the year so far, which came into the day at nearly 62% because of a worldwide shortage for computer memory.

Helping to limit Wall Street's losses was Rivian Automotive, which rose 2.4%. It announced a partnership where Uber will invest up to $1.25 billion in the company and expects to buy 10,000 autonomous robotaxis. Uber Technologies fell 0.9%.