Oil prices rise and stocks fall after U.S. hits Iranian targets in the Strait of Hormuz
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- Stocks slipped and oil jumped Monday as renewed U.S. strikes on Iranian rocket launchers in the Strait of Hormuz rattled Wall Street, ending August’s turbulent trading month on a downbeat note.
- Brent crude climbed back above $90 a barrel and gasoline stayed over $4 a gallon all month, deepening inflation pressures and sharpening expectations the Federal Reserve will raise interest rates again.
- Energy stocks rose on higher oil prices, but shares of California utilities Edison International and Pacific Gas & Electric plunged on wildfire legislation worries, while Amazon’s stock slid after reports of an impending multistate federal antitrust lawsuit.
Wall Street closed out August on a downbeat note Monday as stocks fell and the price of oil rose after the U.S. launched its first military action in a month against Iran.
The Standard & Poor’s 500 index fell 0.3%. The Dow Jones industrial average dropped 0.7% and the Nasdaq composite slipped 0.1%.
August had no shortage of turbulence for the market, but the S&P 500 and Nasdaq each posted a gain for the month after losing ground in July and June. The Dow, meanwhile, managed its fifth-straight monthly gain.
Monday’s losses were broad, with nearly every sector within the benchmark S&P 500 finishing in the red. Energy stocks, though, notched gains. Exxon Mobil rose 2.7% and Chevron rose 2.1%.
On the losing side, Edison International slumped 23.1% and Pacific Gas & Electric fell 20.1% for the two steepest declines. That followed reports about potential California wildfire legislation that would allow insurers to sue utilities over related claims.
Amazon fell 2.5% after the Wall Street Journal reported that the Federal Trade Commission and more than 20 states are preparing to sue the online retail giant over claims the company manipulated prices on its platform.
The U.S. war with Iran remained a key focus for Wall Street. U.S. forces struck Iranian rocket launchers in the Strait of Hormuz on Sunday. Meanwhile, the United Arab Emirates said it intercepted an Iranian drone over its waters on Monday.
The aggressive actions follow a lull in the U.S. war with Iran, which has lasted more than six months.
The war has curtailed traffic in the Strait of Hormuz, through which about 20% of the world’s oil shipments pass. Oil prices remain high after an initial surge earlier in the war and that has made products including gasoline and shipped goods more expensive.
The price of Brent crude, the international standard, rose 2.7% to settle at $90.49 per barrel Monday. Brent fell below $80 earlier in August but has since moved higher amid no sign of an imminent end to the war.
The national average for gasoline in August has been above $4 per gallon every day of the month for the first time, according to the AAA. It has been the most expensive August at the pump on record, outpacing even the enormous supply chain crunch during the COVID-19 pandemic in 2022.
Higher energy prices have fueled already stubbornly high inflation. That has been weighing on household spending and consumer confidence. It has also given the Federal Reserve a more complicated path ahead for its interest rate policy.
The rate of inflation remains well above 3%, which is far beyond the Fed’s 2% target. Wall Street expects the central bank to raise interest rates at least once before the year ends in an effort to cool inflation. On Friday, Fed Chair Kevin Warsh said that inflation is still too high and suggested a rate hike might be necessary in the coming months.
The Fed gets its next inflation update on Sept. 11, just days ahead of its next meeting to determine interest rate policy. Wall Street is forecasting a 66% chance that the Fed will raise its benchmark rate at that meeting, according to CME FedWatch.
“While a September hike is not a foregone conclusion, we expect the Fed to have limited tolerance for meaningful upside inflation surprises,” wrote Brock Weimer, investment strategy analyst at Edward Jones, in a research note.
The yield on the two-year Treasury, which closely tracks expectations about Fed moves, held steady at 4.34%, where it was late Friday. That’s up significantly from about 3.50% at the beginning of 2026.
The yield on the 10-year Treasury rose to 4.75% from 4.73% late Friday. That’s back up around the level seen two weeks ago when the Trump administration took the unusual step of announcing it would intervene in the bond market.
Any increase to interest rates that could cool inflation also risks hurting the jobs market. Later this week, the U.S. reports August jobs data. In July, the U.S. job market stalled unexpectedly as employers cut 23,000 jobs. Labor Department revisions slashed an additional 103,000 jobs from May and June payrolls.
Company updates helped move several stocks Monday. GameStop rose 2.9% after the video game retailer provided a preliminary second-quarter earnings outlook above its year-ago results. Shares of Aon slid 9.5% as the company announced that it was buying insurance broker USI Insurance Services from private equity firm KKR in a deal valued at $17 billion, including debt.
All told, the S&P 500 fell 25.62 points to 7,686.14. It rose 2.6% in August and is up 12.3% this year.
The Dow dropped 374.09 points to 53,185.90. The Nasdaq fell 31.53 points to 26,370.89. The index, which is heavily weighted with big tech stocks, posted a 3.9% gain for the month and is up 13.5% this year.
Markets were mixed in Europe.
Troise and Veiga write for the Associated Press.
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