US stocks fell on Thursday under pressure from the sharp rise in oil prices, with Brent crude returning to levels not seen since May, at a time when tensions related to the war with Iran disrupted global crude oil flows, reinforcing concerns about inflation and increasing pressures in the bond market.
The S&P 500 index fell by 0.6 percent, heading towards recording a loss for the fourth session in a row, despite remaining close to the highest record level recorded last month. The Dow Jones Industrial Average fell 153 points, or 0.3 percent, by 9:35 a.m. Eastern Time, while the Nasdaq Composite Index lost 0.9 percent, according to the Associated Press.
The stock decline came as Brent crude, the global benchmark for oil prices, rose an additional 4 percent, exceeding $105 a barrel for the first time since May. The price of standard US crude also rose by 3.8 percent, briefly exceeding $100 a barrel for the first time since before the Memorial Day holiday.
Oil prices have continued to rise since early July, when the price of Brent crude was below $72 per barrel, with declining hopes of soon reaching an agreement between the United States and Iran that would allow the full reopening of the Strait of Hormuz.
President Donald Trump said on Wednesday that oil prices are likely not to fall before the US midterm elections scheduled for November.
The rise in oil prices led to an increase in the average price of a gallon of regular gasoline in the United States to about $4.28, according to data from the American Automobile Association, an increase of approximately 34 percent from its level a year ago. The repercussions of rising fuel prices are not limited to what consumers pay at gasoline stations, but also extend to the costs of transporting goods by truck, which may raise the prices of a wide range of products in stores.
This coincided with the release of data showing an acceleration of inflation at the wholesale price level in the United States to 5.4 percent last month, compared to 4.8 percent in July. These cost increases may eventually be passed on to consumers as retailers raise prices for goods and services.
Consumer price data is scheduled to be released on Friday, which will provide a clearer indication of the extent of the impact of inflation on American families.
High inflation increases pressure on the Federal Reserve, as one of the usual tools to curb high inflation is to raise the key interest rate. This move leads to higher borrowing costs throughout the economy, reducing demand and putting pressure on investments and prices.
On the other hand, other data issued on Thursday showed that the American labor market may still enjoy some degree of strength, after the number of workers applying for unemployment benefits decreased during the past week.
Following the release of the data, traders' bets rose that the Federal Reserve would raise the main interest rate at its next meeting next week. CME Group data showed that markets are currently pricing in a probability of about 70 percent to raise interest rates, compared to 61 percent the previous day, despite continued pressure from Trump to lower interest rates.
In Europe, the European Central Bank also raised interest rates on Thursday, in an effort to reduce inflation, warning that the conflict in the Middle East “continues to generate inflationary pressures.”
Growing concerns about inflation were reflected in the bond market, as the yield on 10-year US Treasury bonds rose to 4.91 percent, from 4.83 percent at the end of Wednesday’s trading. The yield was only 3.97 percent before the outbreak of war with Iran, returning to levels last seen in the fall of 2023, after the Federal Reserve approved sharp increases in interest rates in the wake of the Covid pandemic.
Higher yields make bonds more attractive to investors, allowing them to achieve greater returns on their investments, which may reduce their willingness to pay higher prices for stocks and other riskier assets.
Macy's shares fell by 2.7 percent, despite the retail company announcing quarterly profits and revenues that exceeded analysts' expectations, in addition to raising its profit expectations and other financial indicators for the fiscal year. The company, on the other hand, warned of the presence of “macroeconomic and geopolitical factors” that may affect customers’ willingness to spend.
Macy's said that it received $116 million from the government in the form of customs duty refunds, including $98 million during the fiscal quarter and $18 million after its end.
Macy's is using part of those proceeds to lower the prices of some goods, including furniture and other high-value purchases, Tony Spring, the company's CEO, told the Associated Press on Thursday.
In terms of global markets, indices declined in most parts of Europe and Asia, and the Hang Seng Index in Hong Kong fell by 1.3 percent, recording one of the largest declines among major indices globally.
The Organization of the Petroleum Exporting Countries (OPEC) reduced its expectations for growth in global oil demand in 2026 for the fifth time in a row, in an indication of the continued impact of the war between the United States and Iran on energy consumption, although the organization is still more optimistic than other parties, including the International Energy Agency.
OPEC said in its monthly report, on Thursday, that it expects global oil demand to grow by 380,000 barrels per day during 2026, in a new reduction in its previous estimates. On the other hand, the organization raised its expectations for demand growth during 2027.
OPEC's estimates differ from the expectations of the International Energy Agency, which expects a decline in global demand for oil in 2026, in light of the repercussions of the war, high energy prices, and a slowdown in economic activity.
Russian production declined
On the supply side, OPEC data showed that Russia’s crude oil production declined by 160,000 barrels per day in August compared to July, reaching 8.718 million barrels per day.
Russian production declined amid continued Ukrainian attacks on Russia's energy infrastructure, including oil refineries.
Russian Deputy Prime Minister Alexander Novak said last week that his country would reduce oil production slightly during the current year, while draft government forecasts - reviewed by Reuters - showed that Russia reduced its expectations for oil production this year to the lowest level in 17 years, and also revised its expectations for fuel exports in 2026 and 2027 due to the war with Ukraine.
On the other hand, Kazakhstan's oil production increased in August by 159 thousand barrels per day on a monthly basis, to 1.807 million barrels per day, according to OPEC data.
Sources in the oil sector linked this increase to the stability of Kazakhstan’s exports via the Caspian Pipeline (CPC), which represents the main route for Kazakh oil exports.
Most Gulf stock markets closed lower on Thursday, with the escalation of the confrontation between the United States and Iran, which reinforced investors' fears of the widening scope of disruptions affecting the region's vital energy and trade corridors.
The market declines came after the most severe maritime escalation since the outbreak of the war 6 months ago, after Iran said it targeted 10 ships near the Strait of Hormuz, following the United States sinking 5 Iranian tankers. The escalation led to increased concerns about shipping movement through the strait, which represents a major corridor for global energy trade, in conjunction with renewed Houthi attacks on southern Saudi Arabia, which also threatens alternative export routes through the Red Sea.
The Saudi market index, TASI, fell 0.1 percent to 11,007 points, affected by a 1.1 percent drop in Ma’aden stock, while Saudi Aramco stock rose 0.4 percent.
In the UAE, the Dubai market index fell 0.4 percent to 5,904 points, affected by a 0.7 percent decline in Emaar Properties’ stock, while the Abu Dhabi market index rose 0.1 percent to 10,112 points.
The Qatari index fell 0.3 percent to 9,824 points, with Qatar National Bank shares falling 1.4 percent.
Outside the Gulf region, the main Egyptian stock index fell 0.4 percent to 56,280 points, with the “Commercial International Bank” stock falling 0.7 percent.
On the other hand, the Muscat Stock Exchange index rose 0.3 percent to 7,648 points, and the Kuwait Index rose 0.1 percent to 9,324 points, while the Bahrain Stock Exchange stabilized at 1,930 points.
George Pavel, General Manager for the Middle East at Naga.com, said that investor sentiment in GCC markets remains cautious in the wake of the recent escalation, noting that Iranian rhetoric, disruption of shipping traffic in the Strait of Hormuz, and ongoing attacks on tankers fuel fears of a long-term confrontation.
The decline in most markets coincided with the rise in oil prices, as Brent crude contracts rose 3.51 percent, or $3.58, to $104.79 per barrel by 12:36 GMT, amid continuing concerns about the disruption of energy supplies from the region.
Brent prices had exceeded the $100 barrier for the first time since late July, with the widening risks facing the movement of oil through the Gulf.
