Brent Tops $100 as Morgan Stanley Warns Oil, Rates Are ‘Main Risks’ to Stocks

Brent crude climbed above $100 a barrel Wednesday as Morgan Stanley warned that higher oil prices and interest rates remain the main near-term risks to stocks.

Analysts led by chief U.S. equity strategist Mike Wilson said "higher oil and rates remain the main risks to equities in the near term," noting that strategic petroleum reserves have already been substantially drawn down.

Brent crossed $100 for the first time since July as renewed Middle East fighting raised fears of further supply disruptions. S&P 500 futures fell about 0.4% early Wednesday.

Why It Matters

Wilson had already warned that oil was a key risk to the rally, arguing that rising crude tends to hurt stocks more than falling prices help them.

Another spike could squeeze corporate margins and push yields higher, with high-beta growth stocks particularly exposed. Goldman Sachs estimates every $10 increase in oil adds about 0.2 percentage points to headline inflation.

Exxon Mobil Corp. (NYSE:XOM)/a> has gained about 33% this year through Tuesday, while Chevron Corp. (NYSE:CVX)/a> is up roughly 38%. Energy stocks have rallied with crude as investors position for higher prices.

Morgan Stanley commodities strategist Martijn Rats warned last week that the oil market’s earlier "shock absorbers" were fading as he forecast Brent would average $100 in the fourth quarter. Rats said oil held at sea has fallen roughly 190 million barrels since mid-July, while global onshore crude inventories fell another 38 million barrels over the same period.

Vitol CEO Russell Hardy said the bigger squeeze is in refined fuels rather than crude, with refineries unable to stop fuel inventories falling. Stockpiles are now "pretty much at the bottom," he said.

Prediction Markets See Ceasefire Before Oil Normalizes

Prediction-market traders are betting the fighting could ease much sooner than oil flows recover.

Polymarket traders put a 74% chance on U.S.-Iran fighting pausing by Sept. 30. The market counts a ceasefire as two straight weeks without qualifying U.S. military action against Iran.

Yet traders give just a 2% chance that Strait of Hormuz traffic returns to normal this month, a market with more than $8 million traded.

A separate contract puts the chance that IMF PortWatch records zero ships transiting Hormuz on at least one day before October 31 at 60%.

That leaves investors with an awkward split: a ceasefire could knock crude lower, while the supply disruption behind Morgan Stanley’s warning may persist.

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