Rising Oil Prices Trigger Inflation Concerns, Pulling Wall Street Down
Driven by the impact of the war with Iran, oil prices reached their highest level since May, stoking inflation fears in global markets and leading to a decline in stock indices.
As the ongoing war with Iran disrupted global crude oil flows, oil prices reached their highest levels since May on Thursday. This drove up inflation concerns and caused stock markets on Wall Street to decline.
The Impact of Rising Oil Prices on the Market
Brent crude surged by 6.3 percent, briefly surpassing $108 a barrel before ending the day at 107.63. These disruptions in global supplies continue to cause anxiety in the markets.
In a statement on Wednesday, U.S. President Donald Trump indicated that oil prices likely will not fall until after the mid-term elections in November.
Downward Trend in Wall Street Indices
Amid mounting pressures, stocks on Wall Street lost value, with the S&P 500 index dropping 0.6 percent to record its longest losing streak since June.
The Dow Jones Industrial Average fell 316 points, or 0.6 percent, while the Nasdaq composite index closed down 0.7 percent.
Inflation and Central Bank Actions
As the average price of regular gasoline nationwide approached $4.28 per gallon, wholesale inflation rose from 4.8 percent in July to 5.4 percent last month.
Traders priced in an approximately 73 percent probability of the Federal Reserve raising the federal funds rate at its meeting next week, while the European Central Bank also raised interest rates on Thursday.
Reflections on the Bond Market and Housing Sector
The yield on the 10-year Treasury note rose from 4.83 percent to 4.95 percent, increasing pressure on the bond market.
Rising interest rates and mortgage costs also negatively impacted the housing sector, dropping sales of previously owned U.S. homes in August to their slowest pace in over a year.