Oil prices climb back to where they were in May and drag Wall Street lower

NEW YORK (AP) — Oil prices keep climbing as the war with Iran keeps clogging the global flow of crude, and they got back to where they were before the summer on Thursday. That’s worsening worries about inflation and cranking up pressure within the bond market, helping to send stocks lower again on Wall Street.

The S&P 500 fell 0.6% and is on track for a fourth straight loss, though it’s not far from its all-time high set last month. The Dow Jones Industrial Average was down 296 points, or 0.6%, as of 10:15 a.m. Eastern time, and the Nasdaq composite was 0.8% lower.

Stocks sank under the weight of rising oil prices. Brent crude, the international standard, climbed another 3.5% and at one point got above $105 per barrel for the first time since May.

The price for a barrel of benchmark U.S. crude rose 3.7% and briefly topped the $100 level for the first time since before Memorial Day.

Oil prices have been jumping since early July, when Brent crude was going for less than $72 per barrel, as hopes fade that the United States and Iran may reach a deal soon to fully reopen the Strait of Hormuz and allow oil tankers to freely exit the Persian Gulf. President Donald Trump said on Wednesday that oil prices likely won’t come down until after the U.S. midterm elections in November.

The jump has pushed the price for a gallon of regular gasoline to an average of nearly $4.28 across the United States, according to AAA. That’s up nearly 34% from a year earlier and is not only costing people more at the pump but also through higher prices for all kinds of products that move by truck to store shelves.

A report on Thursday showed that inflation at the U.S. wholesale level accelerated to 5.4% last month from 4.8% in July. Retailers could eventually pass such increases in prices onto shoppers. A report is coming on Friday that will show how much inflation U.S. consumers are feeling.

The typical move to rein in high inflation is for the Federal Reserve to raise its main interest rate, the federal funds rate. Such a move then filters out through the rest of the bond market, makes it more expensive for U.S. households and businesses to borrow money, slows the overall economy and undercuts prices for investments to hopefully remove some of inflation's fuel.

A report on Thursday suggested the U.S. job market may still remain solid, as fewer workers applied for unemployment benefits last week. That could give the Fed more confidence in the economy's ability to withstand higher interest rates.

Following Thursday’s reports, traders are betting on a roughly 70% chance the Fed will raise the federal funds rate at its meeting next week. That’s up from the 61% probability seen the day before, according to data from CME Group. That’s also despite Trump’s consistent lobbying for interest rates to go lower rather than higher.

The Fed’s counterpart in Europe, the European Central Bank, raised its own interest rates on Thursday in hopes of getting inflation in check. It cited “the conflict in the Middle East” and how it “continues to generate inflation pressures.”

It all pushed the yield on the 10-year Treasury up to 4.91% from 4.83% late Wednesday, which is a significant move for the bond market. It’s up from just 3.97% before the war with Iran began, and it’s back to where it was in the autumn of 2023. That was after the Fed cranked the federal funds rate higher to get super-high inflation coming out of the COVID pandemic under better control.

Higher yields mean investors can make more money from parking their money in bonds, which in turn can make investors less willing to pay high prices for stocks and other investments that carry more risk than bonds.

Macy’s fell 2.7% even though the retailer reported stronger profit and revenue for the latest quarter than analysts expected. It also raised its forecasts for earnings and other financial measures for its fiscal year, but it warned that “there are macroeconomic and geopolitical factors that could influence” how much its customers feel comfortable spending.

Macy’s said it received $116 million in tariff refunds from the government — $98 million during the quarter and another $18 million after the quarter ended. Macy’s CEO Tony Spring told The Associated Press Thursday that it’s using some of the proceeds to lower prices on certain items like furniture and other big-ticket purchases.

Cooper Cos., which sells contact lenses and fertility products, dropped 14.2% after reporting weaker revenue for the latest quarter than analysts expected.

In stock markets abroad, indexes slipped across much of Europe and Asia. Hong Kong’s Hang Seng dropped 1.3% for one of the world’s biggest moves.

AP Business Writers Anne D’Innocenzio and Elaine Kurtenbach contributed to this report.

Trader Edward Curran works on the floor of the New York Stock Exchange, Thursday, Aug. 27, 2026, in New York. (AP Photo/Yuki Iwamura)

Specialists Dilip Patel, right, and Trader Robert Charmak, center, work on the floor of the New York Stock Exchange, Thursday, Aug. 27, 2026, in New York. (AP Photo/Yuki Iwamura)

Options trader Matthew Hefter works on the floor of the New York Stock Exchange, Thursday, Aug. 27, 2026, in New York. (AP Photo/Yuki Iwamura)

Currency traders watch monitors at the foreign exchange dealing room of the Hana Bank headquarters in Seoul, South Korea, Thursday, Sept. 10, 2026. (AP Photo/Ahn Young-joon)

The per-gallon price for regular unleaded fuel is displayed electronically on a sign outside a Conoco gasoline station Wednesday, Sept. 9, 2026, in Denver. (AP Photo/David Zalubowski)

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 worker passes by a screen showing the Korea Composite Stock Price Index (KOSPI), SK Hynix and Samsung Electronics Co. stock price at the foreign exchange dealing room of the Hana Bank headquarters in Seoul, South Korea, Thursday, Sept. 10, 2026. (AP Photo/Ahn Young-joon)

CAIRO (AP) — Yemen is moving closer to a return to civil war as Iran -backed rebels threaten a crucial shipping alternative to the Strait of Hormuz.

Here’s a look at the intensifying conflict along the Red Sea that could tear the Arab world’s poorest country apart once more, and potentially send oil prices even higher above the $100 per barrel mark.

Yemen is home to over 40 million people who fear a return to the civil war that killed 150,000 and brought many others to the brink of famine in one of the world’s most sprawling humanitarian crises. A ceasefire with Yemen’s internationally recognized government and a wider coalition backed by the Saudis began in 2022.

Now that truce is buckling.

Yemen's troubles are in part because of its strategic location at the southern tip of the Arabian Peninsula and alongside the Bab el-Mandeb Strait at the southern end of the Red Sea. It's one of the busiest global shipping lanes and one that the world is turning to as Iran continues to target ships on the Strait of Hormuz.

The civil war left many Yemenis hungry and beyond the reach of aid. In a significant advance, residents said Thursday the Houthis have entered the key Red Sea port of Mokha, which has been held by Yemen’s internationally recognized government.

That endangers another crucial entry point for food and other assistance.

The Houthis' entry into Mokha puts them about 80 kilometers (50 miles) from the Bab el-Mandeb, creating further complications for shipping on the Red Sea — and not only for neighboring Saudi Arabia. The United States has shown signs of wanting to wrap up the Iran war and get oil-laden vessels on the move everywhere, not broaden the fight.

The ceasefire’s fragile calm held until weeks ago, when the Houthis tested a Saudi-led blockade of rebel-held areas. The Saudis struck the international airport in the rebel-held capital, Sanaa, which the Houthis called an attempt to prevent a plane carrying Houthi leaders from returning home after attending the funeral of Iran’s late supreme leader Ayatollah Ali Khamenei.

The Houthis already objected to the Saudis' backing of Yemeni government forces, which the rebels say have been pounding them this week with dozens of airstrikes after the rebels attacked several oil facilities and utilities in Saudi Arabia, wounding dozens of people.

Now, with the Iran war choking the Strait of Hormuz, the Houthis have a new way to inflict pain on their neighbor by declaring a blockade against Saudi Arabia and targeting its efforts to ship its oil via the Red Sea.

The Houthis' backer, Tehran, doesn’t object to causing the U.S.-allied Saudis pain as it tries to limit oil shipments from the Gulf in service of its war aims.

This week, Saudi Foreign Minister Prince Faisal bin Farhan said the path was not closed to diplomacy but that his country would not hesitate to defend itself.

Among Iran’s armed proxies in the region, the Houthis have had a lower profile than Hezbollah in Lebanon and Hamas in Gaza. That, as well as their relative distance, has helped shield them from Israeli attack in the nearly three years since the war in Gaza began.

But the Houthis were quickly targeted with U.S. airstrikes when they tried to insert themselves into the regional conflict by targeting what they called Israeli-linked shipping on the Red Sea off Yemen’s west coast. Those attacks soon faded.

Now, the Houthis are back with a different target, aiming at ships and other assets of Saudi Arabia as it seeks to get its oil out to the world via the Red Sea and the Bab el-Mandeb strait. That Red Sea corridor usually sees $1 trillion of goods move through it per year.

The Houthis are “no longer just positioned on the northern part of the western coast; they now control a much larger stretch of the coastline, bringing them closer to the areas around Bab al-Mandeb,” said Ahmed Nagi, a senior analyst on Yemen at the International Crisis Group.

For global oil consumers already worried about Iran’s attacks on vessels trying to transit the Strait of Hormuz, the threat to yet another global shipping lane is a flashing danger sign, especially with the price of crude oil again trading above $100 a barrel.

Anna reported from Jerusalem. Associated Press journalist Ahmed Haj in Aden, Yemen, contributed to this report.

Yemen's Houthi rebels ride a motorbike during a mobilization campaign in Sanaa, Yemen, Thursday, Sept. 10, 2026. (AP Photo)

Yemen's Houthi rebels march during a mobilization campaign in Sanaa, Yemen, Thursday, Sept. 10, 2026. (AP Photo)

Yemen's Houthi rebels chat as they check their weapons during a mobilization campaign in Sanaa, Yemen, Thursday, Sept. 10, 2026. (AP Photo)

FILE - Members of the Yemeni al-Houthi Shiite rebel group burn an effigy of a U.S. aircraft and a Saudi flag during a demonstration against U.S. and Saudi interference in Yemen, after Friday prayer in Sanaa, Yemen, on April 12, 2013. (AP Photo/Hani Mohammed), File