Oil Price Surge Weighs Heavily on US Stocks Amid Iran Tensions

U.S. stocks weakened on their return to trading after a three-day weekend due to the latest fighting in the war with Iran, which pushed oil prices higher.

The S&P 500 fell 0.4%, while the Dow Jones Industrial Average dropped 520 points, or 1%, as of 10 am Eastern time. The Nasdaq composite was down 0.3%.

In the oil market, Brent crude rose 1% to $97.95 after briefly reaching $99.46. This is a significant increase from around $72 over the last two months due to decreased hopes for a deal to reopen the Strait of Hormuz and restore global crude flow.

Higher oil prices exacerbate concerns about high inflation, which affects people and companies nationwide. The U.S. government will release its August report on wholesale inflation on Thursday, showing an expected acceleration to 5.4% from July's 4.7%. The more closely watched consumer price index will be released on Friday, with economists predicting a slight decrease to 3.3% from July's 3.4%, still above the Federal Reserve's 2% target.

The Fed's upcoming meeting next week will determine whether to cut, raise, or maintain interest rates. A rate increase would traditionally slow the economy and potentially rein in inflation. However, President Donald Trump has lobbied for lower interest rates, which could stimulate the economy and inflation further. The CME Group estimates a 58% probability of a Fed rate hike after its next meeting on September 16.