NEW YORK — Oil prices keep climbing as the war with Iran keeps clogging the global flow of crude, and they got back to where they were before the summer on Thursday. That’s worsening worries about inflation and cranking up pressure within the bond market, helping to send stocks lower again on Wall Street.
The S&P 500 fell 0.6 per cent and is on track for a fourth straight loss, though it’s not far from its all-time high set last month. The Dow Jones Industrial Average was down 296 points, or 0.6 per cent, as of 10:15 a.m. Eastern time, and the Nasdaq composite was 0.8 per cent lower.
Stocks sank under the weight of rising oil prices. Brent crude, the international standard, climbed another 3.5 per cent and at one point got above US$105 per barrel for the first time since May.
The price for a barrel of benchmark U.S. crude rose 3.7 per cent and briefly topped the US$100 level for the first time since before Memorial Day.
Oil prices have been jumping since early July, when Brent crude was going for less than US$72 per barrel, as hopes fade that the United States and Iran may reach a deal soon to fully reopen the Strait of Hormuz and allow oil tankers to freely exit the Persian Gulf. President Donald Trump said on Wednesday that oil prices likely won’t come down until after the U.S. midterm elections in November.
The jump has pushed the price for a gallon of regular gasoline to an average of nearly US$4.28 across the United States, according to AAA. That’s up nearly 34 per cent from a year earlier and is not only costing people more at the pump but also through higher prices for all kinds of products that move by truck to store shelves.
A report on Thursday showed that inflation at the U.S. wholesale level accelerated to 5.4 per cent last month from 4.8 per cent in July. Retailers could eventually pass such increases in prices onto shoppers. A report is coming on Friday that will show how much inflation U.S. consumers are feeling.
The typical move to rein in high inflation is for the Federal Reserve to raise its main interest rate, the federal funds rate. Such a move then filters out through the rest of the bond market, makes it more expensive for U.S. households and businesses to borrow money, slows the overall economy and undercuts prices for investments to hopefully remove some of inflation’s fuel.
A report on Thursday suggested the U.S. job market may still remain solid, as fewer workers applied for unemployment benefits last week. That could give the Fed more confidence in the economy’s ability to withstand higher interest rates.
Following Thursday’s reports, traders are betting on a roughly 70 per cent chance the Fed will raise the federal funds rate at its meeting next week. That’s up from the 61 per cent probability seen the day before, according to data from CME Group. That’s also despite Trump’s consistent lobbying for interest rates to go lower rather than higher.
The Fed’s counterpart in Europe, the European Central Bank, raised its own interest rates on Thursday in hopes of getting inflation in check. It cited “the conflict in the Middle East” and how it “continues to generate inflation pressures.”
It all pushed the yield on the 10-year Treasury up to 4.91 per cent from 4.83 per cent late Wednesday, which is a significant move for the bond market. It’s up from just 3.97 per cent before the war with Iran began, and it’s back to where it was in the autumn of 2023. That was after the Fed cranked the federal funds rate higher to get super-high inflation coming out of the COVID pandemic under better control.
Higher yields mean investors can make more money from parking their money in bonds, which in turn can make investors less willing to pay high prices for stocks and other investments that carry more risk than bonds.
Macy’s fell 2.7 per cent even though the retailer reported stronger profit and revenue for the latest quarter than analysts expected. It also raised its forecasts for earnings and other financial measures for its fiscal year, but it warned that “there are macroeconomic and geopolitical factors that could influence” how much its customers feel comfortable spending.
Macy’s said it received US$116 million in tariff refunds from the government — US$98 million during the quarter and another US$18 million after the quarter ended. Macy’s CEO Tony Spring told The Associated Press Thursday that it’s using some of the proceeds to lower prices on certain items like furniture and other big-ticket purchases.
Cooper Cos., which sells contact lenses and fertility products, dropped 14.2 per cent after reporting weaker revenue for the latest quarter than analysts expected.
In stock markets abroad, indexes slipped across much of Europe and Asia. Hong Kong’s Hang Seng dropped 1.3 per cent for one of the world’s biggest moves.
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Stan Choe, The Associated Press
AP Business Writers Anne D’Innocenzio and Elaine Kurtenbach contributed to this report.
