U.S. stocks pulled back on Monday, August 31, 2026, as renewed military exchanges between the United States and Iran sent crude oil sharply higher and pushed long-term Treasury yields to their highest level since January 2025. The pullback closed out an otherwise strong month for equities, with all three major indexes still finishing August solidly higher despite the late-month volatility. Rising odds of a September rate hike added to the cautious tone as trading moved into the new month.
Indexes Retreat to Close Out August
The S&P 500 fell 0.33% to close at 7,686.14, the Dow Jones Industrial Average dropped 374.09 points, or 0.7%, to 53,185.90, and the Nasdaq Composite slipped 0.12% to 26,370.89. Energy was the only S&P 500 sector to finish higher, adding roughly 2% on the day as oil and gas producers tracked the jump in crude prices, while basic materials and industrials posted the steepest losses. Despite the Monday retreat, all three benchmarks closed out August with solid gains, with the Nasdaq up more than 3%, the S&P 500 up more than 2.5%, and the Dow adding roughly 1% for the month.
Renewed Fighting Near the Strait of Hormuz
The selloff followed reports that U.S. forces struck Iranian rocket launchers near the Strait of Hormuz, with Iran responding by targeting Jordan, the first direct exchange between the two sides in roughly a month. The escalation revived concerns about disruptions to shipping through the strait, a corridor that carries a significant share of global crude exports. Brent crude climbed above $88 a barrel and WTI moved near $86, with traders citing the risk of broader disruption to Gulf energy supply as the main driver of the jump. Both sides appeared far apart on a ceasefire, keeping the risk premium in oil elevated heading into September and leaving energy markets on edge for further headlines.
Rate-Hike Odds Climb Ahead of September
Higher energy costs added to inflation concerns just as the Federal Reserve weighed its next move. Traders lifted the implied probability of a 25 basis point rate increase at the September meeting to 62%, up from about 40% a week earlier, after Fed Chair Kevin Warsh struck a hawkish tone at the Jackson Hole symposium, signaling that persistent price pressures warranted continued vigilance. The combination of firmer oil prices and a more hawkish Fed outlook pushed the 10-year Treasury yield up 4 basis points to 4.76%, its highest level since January 2025, while the 30-year yield climbed to 5.26%, its highest close in months.
Gold, Crypto Stocks and What It Means for Traders
Gold slipped 0.64% on the day but still closed out its best month since February, up roughly 10% in August as investors hedged against both geopolitical risk and firmer inflation expectations. Bitcoin-linked names were among the session's most active movers, with Strategy rising 4.42% after resuming its Bitcoin purchases and Circle Internet Group also advancing as crypto-adjacent stocks outperformed a soft broader tape. In overseas trading, HDFC Bank shares were volatile after a change at the top of the bank, a reminder that stock-specific catalysts kept competing with the macro headlines for investors' attention. With oil, yields and Fed policy all moving together, markets are likely to stay sensitive to Middle East developments heading into September, keeping volatility around energy and rate-sensitive assets in focus.
Daily market analysis by BCM Markets.