Wall Street ended August on a cautious note Monday as the U.S. launched its first military action in a month against Iran, pushing oil prices higher and dragging stocks lower.
The S&P 500 fell 0.3% to 7,686.14. The Dow Jones Industrial Average dropped 374.09 points, or 0.7%, to 53,185.90. The Nasdaq Composite slipped 0.1% to 26,370.89. Losses were broad, with nearly every S&P 500 sector in the red except energy.
The selloff came after U.S. forces struck Iranian rocket launchers in the Strait of Hormuz on Sunday. The United Arab Emirates said it intercepted an Iranian drone over its waters on Monday. The strikes mark an escalation after more than six months of a lull in the U.S.-Iran conflict.
The Strait of Hormuz handles about 20% of global oil shipments, and renewed hostilities there immediately lifted energy prices. Brent crude, the international benchmark, rose 2.7% to settle at $90.49 per barrel. Brent had fallen below $80 earlier in August but has climbed steadily as the war shows no sign of ending.
Higher oil has fed through to consumers. The U.S. national average for gasoline stayed above $4 per gallon every day in August for the first time ever, according to AAA. It was the most expensive August at the pump on record, topping even the 2022 supply-chain crunch.
Energy stocks benefited. Exxon Mobil gained 2.7% and Chevron rose 2.1%. But the broader market struggled with the inflation implications.
Stubbornly high inflation has complicated the Federal Reserve’s path. The inflation rate remains well above 3%, far from the Fed’s 2% target. Fed Chair Kevin Warsh said Friday that inflation is still too high and hinted a rate hike may be needed in coming months. Futures markets now price a 66% chance of a rate increase at the Fed’s September meeting, according to CME FedWatch. The Fed gets its next inflation report on Sept. 11, just days before that meeting.
Bond yields reflected the uncertainty. The yield on the 2-year Treasury held at 4.34%, up sharply from about 3.50% at the start of 2026. The 10-year yield rose to 4.75% from 4.73%.
A rate hike aimed at cooling inflation also risks hurting the labor market. The U.S. releases August jobs data later this week. In July, employers unexpectedly cut 23,000 jobs, and revisions wiped another 103,000 jobs from May and June payrolls.
Corporate news added to the mixed session. Amazon fell 2.5% after The Wall Street Journal reported the Federal Trade Commission and more than 20 states are preparing to sue the company over alleged price manipulation. Utility stocks were hit by California wildfire concerns. Edison International plunged 23.1% and PG&E dropped 20.1% on reports that new state legislation could allow insurers to sue utilities over wildfire claims.
On the upside, GameStop rose 2.9% after issuing a preliminary second-quarter earnings outlook above last year’s results. Shares of Aon slid 9.5% after the insurance broker agreed to buy USI Insurance Services from KKR in a $17 billion deal including debt.
Despite Monday’s decline, August was not all bad for equities. The S&P 500 gained 2.6% for the month and is up 12.3% year-to-date. The Nasdaq rose 3.9% in August and 13.5% this year. The Dow posted its fifth straight monthly gain.
With oil near $90, inflation still elevated, and geopolitical risk flaring again in a critical shipping lane, markets enter September facing the same trade-off as August: stronger energy revenues versus higher costs for households and businesses, and the prospect of more Fed tightening ahead.
