By Barani Krishnan

Investing.com – It looks like the oil rally isn’t immune to fears about U.S. rate hikes — especially if they’re going to be big hikes.

St. Louis Fed President James Bullard not only delivered a kryptonite to the stock market on Thursday with his call for a 100-basis point hike by July, if the central bank doesn’t succeed in making a ding on inflation running at 40-year highs.

Bullard also practically killed oil’s comeback rally, after three days of dreary performance in crude markets triggered by concerns that Iran may be able to end U.S. sanctions that were keeping from the market between one million and two barrels daily from Tehran.

Markets had previously priced in 50 basis points maximum for any Federal Reserve rate increase this year, according to Bullard’s interview with Bloomberg News. 

That the voting member of the Fed’s Federal Open Market Committee would push for an increase double than telegraphed to markets was unnerving enough to Wall Street that it reversed a 1% rally on the from earlier in the day, sending it down 1% instead.

Oil rallies, which were independent of stock markets for many months and followed its own bullish demand drivers to get their oil, also got pulled down this time.

New York’s ICE traded oil settled at $89.88/barrel, up 22 cents or 0.3%. Despite the January reading for the U.S. Consumer Price Index showing new highs since 1982, WTI rallied more than $2 earlier in the day, reaching a session peak of $92.74 earlier. That was, of course, before Bullard’s comments.

The London-traded benchmark oil price was down by 0.2% at $91.41. Brent rose to $93.06 before.

WTI was down by 2% and Brent fell by 2% for the week.

The U.S. crude benchmark was up nearly 20% for the year, while the U.K. counterpart showed an 18% increase.