Oil Prices Top $100 as US Stocks Plummet Amid Inflation Concerns

US stocks fell on Thursday as oil prices surged above $100 a barrel, fueling concerns over inflation and increasing expectations of a Federal Reserve interest rate hike next week.

The Dow Jones Industrial Average declined by 316 points, or 0.60%, while the S&P 500 dropped 0.58% and the Nasdaq Composite fell 0.65%. The declines came as the prolonged US-Iran war continued to disrupt energy supply routes and push oil prices higher.

The rise in oil prices was marked by a 7.1% increase in WTI crude, closing at $102.95 a barrel, its highest close since May 19. Since the Iran war began at the end of February, WTI has gained 52.9%, and year-to-date it's up 78.47%. Brent crude futures also climbed above $108 a barrel during Thursday's session.

The disruptions to shipping through the Strait of Hormuz and the Red Sea raised concerns about further supply shortages. Higher oil prices also pushed the 10-year Treasury yield above 4.945%, its highest level since at least October 2023, putting pressure on equity valuations and increasing borrowing costs for companies and consumers.

The US producer price report released Thursday showed a 0.4% increase in August, in line with expectations, while the annual PPI rose 5.4%, remaining well above the Federal Reserve's 2% inflation target. The data came ahead of Friday's consumer price index report, which investors are watching for further clues about the Fed's interest-rate decision.

Fed funds futures were pricing in a 74% probability of a quarter-point rate increase following next week's meeting, while separate data showed traders pricing around a 70% chance of at least a 25-basis-point increase. The rise in oil prices and Treasury yields has added to concerns that inflation could remain elevated.