Stocks on Wall Street declined on Wednesday as oil prices surged above $100 a barrel amid escalating tensions between the United States and Iran. The S&P 500 fell 0.5 percent, the Dow Jones Industrial Average dropped 0.8 percent, and the Nasdaq composite was down 0.6 percent. All three indexes are positioned for weekly losses.

The market weakness was broad-based, with retailer stocks among the hardest hit. Amazon shares declined 1.8 percent, Starbucks fell 1.9 percent, and Home Depot dropped 1 percent. The only sector within the S&P 500 to gain was energy, buoyed by the rise in oil prices, with Exxon Mobil up 2.2 percent and Chevron rising 1.9 percent.

The increase in oil prices was driven by ongoing conflict between the U.S. and Iran, which escalated on Tuesday when the U.S. destroyed five Iranian tankers in recent attacks. Since the conflict began in February, the Strait of Hormuz—a critical passage through which approximately 20 percent of the world’s oil supply previously moved—has effectively been closed to commercial shipping. Brent crude, the international benchmark, rose 3.4 percent on Wednesday to settle at $101.21 a barrel, marking the first time prices exceeded $100 since July.

President Donald Trump noted that the war with Iran is likely to sustain elevated oil prices at least through the U.S. midterm elections in November. The increased cost of oil is contributing to persistently high inflation, with average U.S. gasoline prices up roughly 32 percent from a year ago, reaching $4.22 per gallon. Rising fuel costs not only affect household expenses directly but also indirectly increase prices for goods and services due to higher transportation costs.

Diesel prices also reached record highs. The average cost per gallon rose to $5.94, surpassing previous records and continuing an upward trend after hitting historic levels last Friday. Diesel’s broader impact on consumer prices stems from its widespread use in shipping and production.

Inflation had already been elevated prior to the war because of ongoing trade disputes, particularly between the U.S. and major trading partners including Canada. Market participants are closely watching upcoming inflation data releases, with the producer price index for August due on Thursday and the consumer price index scheduled for Friday. Both reports are expected to show inflation rates remaining above 3 percent, well above the Federal Reserve’s 2 percent target.

The Fed has maintained its benchmark interest rate in recent months but market expectations reflect about a 62 percent probability of a rate increase at its upcoming meeting next week. Higher interest rates are intended to slow economic activity and bring down inflation by making borrowing more costly.

Bond market movements added to stock market pressure. Following an announcement by the U.S. Treasury that it would repurchase up to $6 billion in long-term debt—an effort to contain rising yields—bond yields briefly increased. The 10-year Treasury yield reached 4.85 percent, its highest since October 2023, before slightly retreating. The 2-year Treasury yield, which is closely watched for signals on Fed policy, rose to 4.43 percent from 4.39 percent.

Market analysts remain cautious about the effectiveness of government interventions to control bond yields. Guy LeBas, chief fixed income strategist at Janney Montgomery Scott, remarked that such efforts have historically had limited success.

Amid the broader market declines, shares of Meta Platforms climbed 6.6 percent following the launch of Muse, a new personal artificial intelligence assistant aimed at helping users manage daily tasks such as scheduling and shopping.