Oil prices continue to climb as violence flares in Iran war

Fuel transport truck driver Chad Middleton refills a gas station in Kingston Springs, Tenn. (George Walker IV/AP)

NEW YORK  — Rising oil prices raised inflation fears and pushed bond yields higher Sept. 1, weighing down stocks on Wall Street.

Oil prices remain high as the Iran war has curtailed traffic in the Strait of Hormuz, which once accounted for about 20% of the world’s oil shipments.

Brent crude gained 4.6% to $94.65 per barrel on Sept. 1, following a 2.7% rise on Aug. 31. U.S. benchmark crude climbed 2.2% to $87.67 per barrel.

The national average for gasoline in August has been above $4 per gallon every day of the month for the first time ever, according to the AAA. It has been the most expensive August at the pump on record, outpacing even the enormous supply chain crunch during the COVID-19 pandemic in 2022.

The U.S. attacked rocket launchers on an Iranian island on Aug. 30, saying they were preparing to launch mines into the Strait of Hormuz. Meanwhile, the United Arab Emirates said it intercepted an Iranian drone over its waters on Aug. 31.

The weak start to September follows a shaky, but mostly positive month for Wall Street. Every major index notched monthly gains in August. The same worries continue to hang over Wall Street, though, including anxiety over stubborn inflation, rising government debt, and the impact on the economy from global conflicts.

For the first time in history, the national average price of gasoline was above $4.00/gallon every single day in August. A painful new record for American drivers. 

Video: https://t.co/NOH9N9hzpO pic.twitter.com/38YbwIMd5j

— Charlie Bilello (@charliebilello) August 31, 2026

The S&P 500 fell 0.7%. The Dow Jones Industrial Average fell 302 points, or 0.6%, as of 9:54 a.m. Eastern time. The Nasdaq composite fell 1.1%.

Technology stocks were among the heaviest weights on the market. Nvidia fell 1.7% and Micron Technology fell 2.1%.

Much of the pressure being felt by Wall Street is coming from an ongoing sell-off in U.S government bonds. The yield on the 10-year Treasury, which tends to impact mortgage rates, rose to 4.78% from 4.75% late Aug. 31.

The yield on the 2-year Treasury, which closely tracks expectations for Federal Reserve moves on interest rates, rose to 4.37% from 4.34% late Aug. 31. That’s up significantly from about 3.5% at the beginning of 2026.

Bond yields have an inverse relationship to prices, and yields rise as prices fall. Rising yields signal that investors are demanding a higher return from Treasurys because they are becoming riskier. Growing government debt is highlighting that risk.

The U.S. debt surpassed $40 trillion two weeks ago, a shocking milestone as defense costs and interest on the burgeoning deficit make up an enormous share of federal spending. The bond sell-off is global, with other nations facing the same economic pressures.

Higher yields on bonds signal higher borrowing costs on mortgages and a wide range of other loans. Higher borrowing costs tend to weigh down investments, including stocks, while making it more difficult for businesses to expand.

Oil prices have been behind much of the pressure on inflation, bond yields and the broader stock market. 

Higher oil prices have pushed up costs for everything from gasoline to shipped goods, fueling inflation that has been squeezing households and businesses. Higher inflation has also been a problem for the Fed, which is aiming to bring inflation down to a 2% rate.

The rate of inflation is well above 3% and Wall Street expects the Fed to raise interest rates before the year is over in order ease the rate of price increases.

Markets in Europe fell and markets in Asia were mixed.

AP Business Writers Elaine Kurtenbach, Michelle Chapman and Matt Ott contributed to this report.