Houthi Strikes on Riyadh Push Oil Past $93 as Fed Hike Fears Linger

Markets navigated a collision of geopolitical shock and monetary policy anxiety on October 12, with equities barely holding ground as energy prices surged and bond markets remained shuttered for Columbus Day. The S&P 500 slipped -0.06% to 7,807.24, sitting comfortably above its 20-day moving average of 7,707 but encountering resistance at higher levels with RSI at 59.4. The Nasdaq shed -0.44% to 27,245.90, thin holiday volumes amplifying intraday swings. The US dollar index added 0.36% to 102.58, extending its climb above all major moving averages, with RSI at 71.9 signaling overbought conditions that have yet to deter buyers seeking safe-haven flows.

The dominant market story was the escalation of Houthi strikes on Saudi Arabia. Missile and drone attacks on King Khalid International Airport in Riyadh, continuing from the weekend into Monday, killed at least 12 people including one American and wounded more than 300, the deadliest assault on a Gulf Arab nation in the current conflict. Operations at the airport were suspended, and separately, drone strikes hit an oil tanker near Sohar anchorage in the Gulf of Oman, with UKMTO reporting multiple additional incidents in the Strait of Hormuz corridor. The disruption to the World Petroleum Congress unfolding in Riyadh, which kept major oil company executives away, added a symbolic weight to the physical supply risk. WTI crude surged 2.06% to $93.74, holding near its 20-day moving average of $94 with RSI at 53.8, a reading that still leaves considerable room for further upside if the Hormuz threat intensifies. Brent settled near $107 per barrel. President Trump warned Washington could join Saudi Arabia in retaliatory strikes against the Houthis and issued direct warnings to Iran.

An early-session wrinkle came from Trump's announcement of a Russia-Ukraine energy infrastructure ceasefire. The news briefly pulled Brent toward $103.38 from approximately $104.72 in Asian trading. The relief proved short-lived. Ukrainian President Zelenskyy stated he had learned of the arrangement via social media, offered only conditional support contingent on Russian reciprocation and US guarantees, and confirmed that Russian strikes on Ukrainian energy facilities had continued after the announcement. Russia offered no public confirmation. The deal is best characterized as contested and non-operational, and markets quickly repriced back toward the dominant Middle East supply disruption narrative. OPEC+ ministers meeting on the sidelines of the IEF in Riyadh reinforced that message, warning that shipping and insurance costs had reached unprecedented levels exceeding one-third of commodity value, while simultaneously cutting their 2026 oil demand growth forecast to 400,000 barrels per day.

On the rates front, the 10-year Treasury yield held unchanged at 5.24% with the bond market closed, but the macro backdrop pressing on fixed income remains severe. The September ISM Services PMI, which framed Monday's session, fell to 54.9 from 55.4, missing forecasts, but the Prices Paid component surged to 74.0, its highest since July 2022, underscoring that service-sector inflation is not cooling. The Fed's first rate hike in three years, a 25 basis point move to 3.75%-4.00% in late September, looks like the beginning of a cycle rather than a one-off adjustment, with 16 of 18 Fed officials signaling further tightening. Scheduled remarks from Governor Christopher Waller and Cleveland Fed President Beth Hammack were closely parsed for clues on the pace of follow-on hikes. Gold fell -0.61% to $4,190.60, trading below its 20-day, 50-day, and 200-day moving averages, with RSI at 41.7, a technically weak setup that reflects competition from a strengthening dollar and elevated real yields rather than any diminishment of geopolitical anxiety.

The week ahead will be shaped by the IMF's World Economic Outlook release, which markets expect to trim global growth forecasts and raise inflation projections in light of the energy shock. Any further escalation in the Strait of Hormuz, where even a partial disruption to the roughly 20% of global oil supply passing through daily would amplify the inflationary spiral already evident in ISM data, represents the primary tail risk. With the 10-year yield RSI at 65.3 and creeping toward overbought territory, a decisive re-opening of the bond market Tuesday will test whether the current 5.24% level holds as a floor or invites further selling. Equity markets, holding above key moving averages but generating little upside momentum, face a challenging earnings season backdrop where rising input costs from energy and freight will feature prominently in corporate guidance.