US-Iran Conflict Sparks Market Volatility
The stock market closed out August on a downbeat note as stocks fell and oil prices rose after the US launched its first military action in a month against Iran.
The S&P 500 index fell 0.3%, while the Dow Jones Industrial Average dropped 0.7% and the Nasdaq composite slipped 0.1%. Energy stocks, however, notched gains, with Exxon Mobil rising 2.7% and Chevron increasing by 2.1%.
The US war with Iran has curtailed traffic in the Strait of Hormuz, which accounts for about 20% of the world's oil shipments, leading to high oil prices. The price of Brent crude rose 2.7% to settle at $90.49 per barrel on Monday, while the national average for gasoline in August has been above $4 per gallon every day of the month for the first time ever.
The higher energy prices have fueled already stubbornly high inflation, which remains well above 3%. This has weighed on household spending and consumer confidence, giving the Federal Reserve a more complicated path ahead for its interest rate policy. Wall Street expects the central bank to raise interest rates at least once before the year ends in an effort to cool inflation.