London (AFP) - Oil prices jumped Monday after Saudi Arabia closed a key pipeline amid the Middle East war, deepening worries about sustained inflation that is expected to prompt higher interest rates from the US Federal Reserve.

A widespread sell-off in technology stocks also rattled sentiment, after warnings from AI insiders that development of the technology could be outpacing the ability to control it.

The Brent international crude contract resumed climbing towards $110 a barrel, with US diesel fuel prices – a key cost for transport, farming and construction – hitting a new record above $6 a gallon.

Stocks on Wall Street moved lower following losses across most of Asia and Europe, while the dollar gained on the back of rising oil prices and the prospect of a Fed rate hike on Wednesday.

“Oil and AI fears are causing a double headache for investors, with bond yields rising again and a loss of momentum on equity markets,” said Russ Mould, investment director at AJ Bell.

“It adds to existing inflation fears which were stoked last week by the latest US consumer price index data remaining at elevated levels,” he added.

The yield on the 10-year US Treasury note hit five percent for the first time since 2023, with the yield on the 30-year US Treasury bond was at its highest level in nearly 20 years.

Anthropic CEO Dario Amodei was among the latest to sound the alarm on AI risks, calling Saturday on firms to slow the development of the powerful technology, saying that “addressing the risks requires even more prudence”.

His call was joined by CEOs of several other major AI firms.

Their statement is worrisome because “the AI trade has been the engine of both the economy, and of the stock market over the last several years,” said Adam Sarhan of 50 Park Investments.

It forced investors to “reassess the speed, scale and monetisation timeline of the sector’s capital expenditure boom”, said Patrick Munnelly, market strategist at Tickmill Group.

Higher interest rates feed into fears that AI profits may not materialise as fast as hoped, a concern exacerbated by persistently high oil and gas prices from the escalating Middle East war.

The Philadelphia semiconductor index which includes the top chipmakers that benifit from the AI investment boom fell around five percent.

Oil prices rose after Riyadh shut its East-West pipeline – a key export route become more important with Iran’s effective closure of the Strait of Hormuz – following drone attacks by Yemen’s Houthis.

It came after the Houthis have been cementing their hold on the Bab al-Mandab strait, a vital shipping corridor linking Europe and Asia via the Red Sea.

Analysts widely expect the Federal Reserve to raise interest rates since US inflation remains well above the central bank’s two percent target.

“It would be a big – a massive – surprise if the Fed delivers anything else but that in terms of the rate decision itself,” said Forex.com analyst Fawad Razaqzada.

But that would put it on a crash course with US President Donald Trump, who has pledged economic relief ahead of midterm congressional elections in November.

Markets see “a 92 percent probability of a hike, with 50 basis points of cumulative tightening assumed by year-end”, said Chris Weston, an analyst at Pepperstone.

- Key figures at around 1530 GMT -

Brent North Sea Crude: UP 3.6 percent at $108.32 per barrel

West Texas Intermediate: UP 3.4 percent at $103.48 per barrel

New York - Dow: DOWN 0.4 percent at 52,369.85 points

New York - S&P 500: DOWN 0.6 percent at 7,609.21

New York - Nasdaq: DOWN 0.7 percent at 26,140.26

London - FTSE 100: UP 0.4 percent at 10,697.57 (close)

Paris - CAC 40: DOWN 0.8 percent at 8,117.78 (close)

Frankfurt - DAX: DOWN 0.5 percent at 25,440.81 (close)

Tokyo - Nikkei 225: DOWN 0.8 percent at 63,492.99 (close)

Hong Kong - Hang Seng Index: UP 0.5 percent at 24,917.60 (close)

Shanghai - Composite: DOWN 0.1 percent at 3,885.33 (close)

Euro/dollar: DOWN at $1.1542 from $1.1596 on Friday

Pound/dollar: DOWN at $1.3482 from $1.3527

Euro/pound: DOWN at 85.62 pence from 85.73 pence

Dollar/yen: UP at 154.56 yen from 153.71 yen

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