Wall Street closed out August with declines on Monday as investors reacted to renewed U.S. military action against Iran, pushing oil prices higher while equities broadly dropped. The Standard & Poor’s 500 index fell 0.3%, the Dow Jones Industrial Average declined 0.7%, and the Nasdaq composite slipped 0.1%.
The month of August had been marked by market volatility, but both the S&P 500 and Nasdaq still posted monthly gains of 2.6% and 3.9%, respectively, following losses earlier in the summer. The Dow recorded its fifth consecutive monthly increase, rising over 12% for the year.
Monday’s losses were widespread across sectors, with nearly all segments of the S&P 500 ending lower. However, energy stocks bucked the trend, gaining amid rising oil prices. ExxonMobil shares climbed 2.7%, and Chevron rose 2.1%, reflecting growing concerns over supply disruptions related to the ongoing conflict in the Middle East.
The renewed military activity stems from U.S. forces striking Iranian rocket launchers near the Strait of Hormuz on Sunday. The United Arab Emirates also reported intercepting an Iranian drone over its territorial waters on Monday. These actions represent a resumption of hostilities after roughly a month of relative quiet in a conflict that has persisted for more than six months.
The Strait of Hormuz remains a critical chokepoint for global oil shipments, with approximately 20% of worldwide oil tanker traffic passing through the waterway. Brent crude oil prices rose 2.7%, settling at $90.49 per barrel, after dipping below $80 earlier in August. The increase in oil prices is contributing to record-high gasoline costs in the United States, where the national average price has remained above $4 per gallon throughout August, according to AAA. This marks the most expensive August at the pump on record, surpassing price spikes experienced during the COVID-19 pandemic in 2022.
Rising energy prices have exacerbated inflationary pressures that remain well above the Federal Reserve’s 2% target. Inflation steady above 3% has weighed on consumer spending and confidence, complicating the Fed’s monetary policy decisions. Market participants widely anticipate at least one interest rate increase by the Fed before year-end to attempt to rein in inflation.
The Federal Reserve’s upcoming inflation data release on September 11 will precede its next policy meeting, where interest rate adjustments will be considered. Some analysts suggest the central bank’s tolerance for inflation surprises is low, making a rate hike likely, though not guaranteed. Treasury yields remained elevated, with the two-year note at 4.34% and the 10-year note slightly higher at 4.75%.
Investors are also closely watching employment data due later this week following an unexpected decline in jobs in July. Revised figures for May and June also showed downward revisions in payrolls, highlighting concerns about the labor market’s resilience amid tightening monetary policy.
Among individual stocks, Amazon shares fell 2.5% amid reports that the Federal Trade Commission and multiple states are preparing a lawsuit alleging the company manipulated pricing on its platform. Utility companies Edison International and Pacific Gas & Electric saw steep declines of 23.1% and 20.1%, respectively, after news of potential California wildfire legislation that would permit insurers to sue utilities for wildfire-related damages. Conversely, GameStop rose 2.9% after forecasting better-than-expected second-quarter earnings, while shares of insurance broker Aon slipped 9.5% after announcing a $17 billion acquisition of USI Insurance Services.
Overall, the turbulence reflects ongoing geopolitical tensions and economic concerns as investors navigate a complex environment shaped by the prolonged Iran conflict, inflationary pressures, and evolving monetary policy.