Wall Street down, oil up as inflation, Middle East worries persist

On Tuesday, Wall Street experienced a decline while oil prices neared the $100 per barrel mark as investors grappled with potential inflation issues and ongoing strife in the Middle East. The Dow Jones Industrial Average fell by 1.18%, the S&P 500 dropped 0.58%, and the Nasdaq Composite slipped 0.32%. The MSCI gauge for global stocks also decreased by 0.55%.

Oil prices surged following an attack by Iran-backed Houthis on Saudi energy facilities, with Brent crude oil increasing by 2.13% to $99.07 a barrel and US crude climbing 2.82% to $94.05 a barrel. Rising inflation has been dragging down equity markets, primarily due to bond yields surging to multi-year peaks, putting pressure on central banks to raise interest rates.

The European Central Bank is expected to increase euro zone rates by 0.25% on Thursday, and the likelihood of the Bank of Japan following suit next week is growing, which is causing the yen to rally to its strongest level in two years. The Federal Reserve is also expected to reassess its rates, releasing a statement on September 16.

The latest US inflation data on Friday is expected to be crucial in determining the Federal Reserve's decision-making process. While oil prices have dominated the market on Tuesday, the yen's rise is also of significant importance to global markets. The yen has gained nearly 4% over the past week, the largest weekly increase since July 2024, and currently trades around 153.97, leading to a slight dip in the dollar.

The dollar index, which tracks the greenback's performance against a basket of currencies, including the yen and the euro, rose by 0.02% to 98.86. In other commodities, copper prices reached a record high on Tuesday, with three-month copper on the London Metal Exchange increasing by 1.5% to $14,728 a ton. In the bond market, US 10-year Treasury notes were yielding 4.8%, nearing their highest level since November 2023.