Oil falls 7% and heads for its worst day in six months as the banking crisis sends markets fleeing

Oil prices fell more than 7% on Wednesday as traders feared a looming banking crisis could hurt global economic growth.

West Texas Middle School Futures fell more than 7% to $66.24 a barrel. That would be WTI’s biggest one-day drop since July 12, 2022 — when it plunged 7.9%. Brent crude oilthe international benchmark, slipped 6.6% to $72.30 a barrel.

The decline came as global risk markets sold off after it was announced that Credit Suisse’s largest investor, the National Bank of Saudi Arabia, would not provide further support to the troubled bank. The news sent the bank’s US-listed shares down more than 20%. Less than a week after the collapse of two US regional banks, there was also concern about the state of the global banking system.

Stress among smaller banks prompted Goldman Sachs to lower its US GDP growth forecast.

“Small and mid-sized banks play an important role in the US economy,” Goldman economists wrote. “Banks with assets under $250 billion account for approximately 50% of US commercial and industrial lending, 60% of residential real estate lending, 80% of commercial real estate lending, and 45% of consumer lending.”

“Policymakers in the US have taken aggressive steps to shore up the financial system, but concerns about stress at some banks remain,” they added. “Continued pressure could lead smaller banks to become more conservative in lending to conserve liquidity if they need to meet depositor withdrawals, and tightening lending standards could weigh on aggregate demand.”

The Federal Reserve is scheduled to hold a policy meeting next week. Earlier this week, traders had priced in a rate hike of at least 25 basis points. However, CME Group FedWatch The tool now shows an almost 2-to-1 chance that rates will remain at current levels.

— CNBC’s Christopher Hayes contributed to this report.