Wall Street suffered its worst day in a month on Thursday, driven by a surge in oil prices above $100 a barrel for the first time since May and steep losses for two of the largest technology stocks. The S&P 500 fell 1.2 percent, the Dow Jones lost 1.0 percent, and the Nasdaq composite dropped 2.2 percent, according to multiple reports. The declines were broad-based: the S&P 500’s technology sector fell 1.12 percent and the communication services sector depreciated 5.20 percent, while airlines with large fuel bills — American Airlines and Southwest Airlines — each fell more than 6 percent despite beating earnings expectations.

The catalyst for the oil spike was an attack on two Saudi oil tankers in the Red Sea, claimed by the Iran-backed Houthi movement in Yemen. US President Donald Trump then threatened “major military punishment” against the Houthis if they continue such attacks, according to the Axios news site cited by Valor Econômico and The Sydney Morning Herald. Brent crude jumped 7 percent to settle at $100.69 a barrel, and touched $102 during the session, The Sydney Morning Herald reported. The price rise threatens to worsen inflation just when it had begun to decelerate, raising the probability that the Federal Reserve will raise interest rates at its meeting next week. Traders are betting on a 36 percent chance of a rate hike, up from 12 percent a week ago, according to CME Group data cited by The Sydney Morning Herald. The European Central Bank held its main interest rates steady at its meeting on Thursday.

The technology rout was led by Tesla, whose shares tumbled 14.5 percent after the electric-vehicle maker reported weaker-than-expected second-quarter profit and negative free cash flow for the first time in more than two years, according to The Economic Times and The Sydney Morning Herald. Alphabet, the parent of Google, fell 6.9 to 7.1 percent despite beating revenue expectations, because it raised its capital spending forecast — now up to $205 billion — amid heavy investment in artificial intelligence, and reported negative free cash flow, as noted by Forbes Russia and Valor Econômico. Analysts at GBM, cited by El Financiero, said the results “reignited concerns about the growing cost of the race for artificial intelligence” after both companies warned of a sharp increase in capital expenditure despite solid operational progress. The CBOE Volatility Index, Wall Street’s fear gauge, hit its highest level in nearly a month during the session.

Geopolitical tensions in the Middle East remain elevated after the Houthi attack opened a new front in the conflict between the United States and Iran, according to Valor Econômico. The US military launched another round of air strikes on Iran, and Iran fired at neighbouring Arab countries housing US bases, The Economic Times reported. The oil price jump adds to inflationary pressure just days before the Federal Reserve’s next policy meeting, where the probability of a rate increase has risen sharply from a week ago. No further major earnings from the Magnificent Seven are scheduled until the following week, leaving markets to weigh the trajectory of oil prices and central bank policy ahead of the Fed’s decision next week.