Oil Prices Weigh on Wall Street as Fed Rate Hike Odds Rise

The stock market is feeling the pressure from rising oil prices and increased tensions in the Middle East. The S&P 500 fell 0.4% on Tuesday, while the Dow Jones Industrial Average dropped 520 points, or 1%, by 10 a.m. Eastern time. The Nasdaq composite was down 0.3%. In the oil market, Brent crude rose 1% to $97.95 after briefly reaching as high as $99.46. It's jumped from around $72 over the last two months due to concerns about the Strait of Hormuz and the global flow of crude.

The rising cost of oil is exacerbating worries about inflation, which has already reached 4.7% in July according to wholesale data. On Thursday, the U.S. government will release its August report on inflation at the wholesale level, with economists expecting an acceleration to 5.4%. The more closely watched consumer price index (CPI) report comes out on Friday and is expected to show a slight easing of inflation to 3.3% from July's 3.4% rate.

The Federal Reserve will meet next week to decide whether to cut, raise or hold interest rates steady. Historically, the Fed raises interest rates when inflation is high to slow down the economy and curb price growth. However, President Donald Trump has been lobbying for lower interest rates, which could give the economy an extra boost.

Despite the uncertainty, traders are betting on a 58% probability that the Fed will raise its federal funds rate after the next meeting finishes on September 16.