Stocks fall on Wall Street as oil prices jump back above $100 a barrel after Iran war escalates

Stocks on Wall Street lost ground again Wednesday as the price of crude oil climbed back above $100 a barrel amid further escalation in the U.S. war with Iran.

The S&P 500 index fell 0.5%. The Dow Jones Industrial Average dropped 0.8%, and the Nasdaq composite gave up 0.6%. The indexes are each on track for a weekly loss.

The losses were broad, with retailers among the companies that pulled the market lower. Amazon fell 1.8%, Starbucks lost 1.9% and Home Depot dropped 1%. Every sector within the benchmark S&P 500 declined except for energy, which rose as oil companies notched gains. Exxon Mobil rose 2.2% and Chevron added 1.9%.

Oil prices drove much of the action on Wall Street. The U.S. destroyed five Iranian tankers on Tuesday in a series of attacks between the two nations. The conflict that began in February has essentially shut down traffic in the Strait of Hormuz, where a fifth of the world’s oil supply passed before the war began.

The price of Brent crude, the international standard, rose 3.4% to settle at $101.21 a barrel. It marks the first time the price surpassed $100 a barrel since July.

The Iran war is likely going to keep oil prices elevated at least through the U.S. midterm elections in November, President Donald Trump said Wednesday.

The jump in oil prices over the course of the war has fueled already high inflation. Gasoline prices in the U.S. are up about 32% from a year ago to $4.22 per gallon. Higher fuel prices cut into household budgets directly when it comes to the cost of driving, but they also indirectly raise prices for goods because of higher shipping costs.

The price of diesel, which can have an outsized impact on consumers because it is used in shipping and production, hit an all-time high Friday and has continued to climb since. The average price for a gallon reached $5.94 overnight and is now 9 cents higher than it was Friday.

Inflation was already stubbornly high when the U.S. started its war against Iran because of the ongoing U.S. trade war with much of the world. That trade war is also heating up, especially between the U.S. and its close ally and trade partner Canada.

Wall Street will get more updates this week on inflation, starting with a look at prices at the wholesale level on Thursday with the release of the Producer Price Index for August. It measures prices businesses pay for goods before they reach customers. That report will be followed up Friday with the release of the Consumer Price Index, or CPI, for August, which shows the more direct price impact for households.

The latest reports are expected to show that the rate of inflation remains above 3%. That has been an issue for the Federal Reserve, which is aiming to hold inflation at a target rate of 2%. The central bank has been holding rates steady, but Wall Street is leaning toward a 62% chance that it will raise its benchmark interest rate at its meeting next week, according to data from CME Group.

Higher interest rates make borrowing more expensive. The goal of raising interest rates is to slow the economy and cool inflation.

Rising Treasury yields in the bond market were also weighing down stocks on Wall Street Wednesday.

The U.S. Treasury Department on Wednesday said it would buy back up to $6 billion in long-term debt. That follows an announcement in August previewing plans for an unusually large buyback in an effort to contain rising yields, which make it more expensive for U.S. companies to borrow money and also weigh down other investments, such as stocks.

Bond yields had been holding steady prior to the announcement, but gained ground shortly after.

“The simplest version here is that market interventions have a long history of not working very well,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott.

The yield on the 10-year Treasury, which tends to impact mortgage rates, rose to 4.85% — its highest point since late October of 2023 — before easing to 4.84% from 4.80% late Tuesday. The yield on the 2-year Treasury, which tends to track expectations for Fed moves on interest rates, rose to 4.43% from 4.39% late Tuesday.

Bond yields have an inverse relationship to prices. Yields rise as bond prices fall. Rising yields signal that investors are demanding a higher return from Treasurys.

Elsewhere on Wall Street, shares of Meta Platforms rose 6.6% as the parent company of Instagram and Facebook launched a personal artificial intelligence agent, Muse, for people 18 and over who are looking for help with day-to-day tasks like schedules and shopping.

All told, the S&P 500 fell 37.16 points to 7,636.36. The Dow dropped 405.41 points to 52,380.66, and the Nasdaq gave up 168.07 to close at 26,253.34.

Markets in Europe fell while markets in Asia closed mixed.

AP Business Writers Yuri Kageyama and Michelle Chapman contributed to this report.

Specialists Dilip Patel works on the floor of the New York Stock Exchange, Thursday, Aug. 27, 2026, in New York. (AP Photo/Yuki Iwamura)

A person walks in front of an electronic stock board showing Japan's Nikkei index at a securities firm Wednesday, Sept. 9, 2026, in Tokyo. (AP Photo/Eugene Hoshiko)

A person walks in front of an electronic stock board showing Japan's Nikkei and New York Dow indexes at a securities firm Wednesday, Sept. 9, 2026, in Tokyo. (AP Photo/Eugene Hoshiko)

A person walks in front of an electronic stock board showing Japan's Nikkei index at a securities firm Wednesday, Sept. 9, 2026, in Tokyo. (AP Photo/Eugene Hoshiko)

Britain says it has reached an agreement with Israel over its consulate in east Jerusalem, even as Israel said the building had “ceased to function” as a consulate and that 20 diplomats would leave the country. The sign outside it was removed.

The British military said late Wednesday that several projectiles struck a tanker off the coast of Qatar, causing multiple casualties, but did not provide more details.

Here is the latest news from the Middle East on Thursday. Read our full coverage here.

Britain said it had reached an agreement with Israel's government to downgrade its consulate in east Jerusalem, and a small team of diplomats will continue to operate in what will now be known as the U.K. Mission.

Israel's government said last month it would close the consulate in response to the United Kingdom banning trade with Israeli settlements in the occupied West Bank.

Israeli Foreign Minister Gideon Saar said in a statement that the consulate had “ceased to function as a consulate.” He said twenty British diplomats will leave Israel, and that the building will continue to operate with seven diplomats engaged in limited activity.

“Israel will no longer turn its cheek to diplomatic attacks against it," he said.

British Foreign Secretary Ed Miliband denied the building will close and said it will be known as the U.K. Mission. Miliband said the seven diplomats remaining will continue to work with Palestinians, but gave no details. The UK said based on the current agreement, it would not take reciprocal action such as expelling Israeli diplomats from London.

The British military said late Wednesday that several projectiles struck a tanker off the coast of Qatar, causing multiple casualties.

The United Kingdom Maritime Trade Operations Center said the attack took place in the Persian Gulf, north of Qatar’s city of Madinat ash Shamal. The city is on the northern tip of Qatar.

The U.K. military did not identify the tanker and did not provide any details about the casualties. There was no immediate claim of responsibility for the attack and no comment from Qatar.

Prime Minister Benjamin Netanyahu’s former military secretary has accused the Israeli leader of altering official transcripts of phone calls from the morning of the Oct. 7, 2023, Hamas-led attacks.

The accusations by Maj. Gen. Avi Gil came in a wide-ranging interview with the right-wing Israel Hayom newspaper.

In excerpts of the interview published Thursday, Gil accused Netanyahu of attempting to change records of their phone calls in the first hour of the attack, possibly in an attempt to shift blame for failures that morning from the prime minister to his advisers.

Gil said he reported the attempt, allegedly made by Netanyahu's chief of staff, to the attorney general. Gil served as military secretary from 2021 to 2024.

In the interview, Gil also confirmed that a senior Egyptian intelligence official had visited Israel shortly before the Oct. 7 attack. Asked whether there had been a warning, Gil said he did not know what message was relayed, but added: "Whoever met with someone or received something is still concealing it today.”

Gil’s full interview is expected to be published over the weekend, and an interview with an Israeli TV channel is also planned.

The report comes as Netanyahu, Israel's longest-serving prime minister, is seeking re-election on Oct. 27. His Likud party told Israel Hayom that Gil's comments are part of an attempt to oust Netanyahu from power, the paper said.

This report will be updated throughout the day as new developments emerge.

Barricades block the main road leading to British Consulate after the sign outside the consulate was taken down, in east Jerusalem, Thursday, Oct. 8, 2026. (AP Photo/Mahmoud Illean)

A car enters the British Consulate after the sign outside the consulate was taken down, in east Jerusalem, Thursday, Oct. 8, 2026. (AP Photo/Mahmoud Illean)

A mosque's minaret and buildings are seen in the West Bank village of Abu Dis behind the Israel's separation wall near Jerusalem, Monday, Oct. 5, 2026. (AP Photo/Leo Correa)