NEW YORK, September 1, 2026– The trading desk at a major Manhattan brokerage felt unusually quiet by mid-afternoon on Monday, August 31. Floor traders leaned over their monitors in silence, eyes pinned to real-time crude oil ticks as phone lines filled with anxious calls from institutional clients. It wasn’t the end-of-summer lull everyone had hoped for; it was the quiet of traders staring nervously at oil charts.
Wall Street ended the month of August on edge following reported military actions near Larak Island in the Strait of Hormuz. The situation rapidly escalated, shaking up energy markets, with West Texas Intermediate surpassing $85 a barrel and Brent crude climbing above $90 a barrel. The instant increase in energy prices has renewed fears of sticky inflation, affecting the sentiments of investors right at the monthly close. The Dow Jones Industrial Average fell by 374 points, or about 0.7%, while the S&P 500 lost 0.33% and the Nasdaq Composite slipped 0.12%.
And this matters because equities were actually cruising toward a solid monthly win.
However, in spite of a rather bumpy finish, the general market was able to maintain the small positive monthly trend. Major tech stocks and AI stocks offered sufficient protection to the general rally after the past three weeks. The S&P 500 index showed gains of about 2%, while the tech-dominated Nasdaq maintained its gains of 3%. However, the military action on Monday in the Strait of Hormuz, an important transportation channel for world energy supplies, reminded institutions how vulnerable these gains are.
“Chair Warsh delivered a distinctly more hawkish message than investors anticipated, making it abundantly clear that policy easing is not on the horizon,” said David Chao, global market strategist for Asia Pacific at Invesco, referring to recent central bank commentary. Commodity desks across Wall Street broadly reinforced that sentiment in afternoon notes, pointing out that supply-friction risks in the Strait of Hormuz create an immediate price floor for crude—leaving central banks with little justification to ease policy if Brent remains elevated above $90.
As crude prices soared past 3% in a single trading session, rate bets by traders got revised quickly. Based on the data obtained from the CME FedWatch Tool, the chances of an interest rate increase in September rose above 60%, compared to about 41% last week.
Market anxiety was reflected through Monday’s sectoral performance. Energy stocks surged by more than 2% amid rising crude prices, while oilfield service stocks such as Halliburton rallied by more than 2.4%. In addition to the energy sector and a few chip companies such as Nvidia and Intel, red was seen everywhere in the stock market. Rate-sensitive sectors were hit hard by the sell-off, with communications falling by 1.3% and utilities down by 1.1% with rising bond yields. The yield on the 10-year Treasury note climbed to 4.75%, the highest in several months.
And here is where the riddle comes into play: corporate profits for the quarter have been robust. Corporate balance sheets have not been imploding in any sense. But the market drivers remain entirely macro-driven at the moment. It should be mentioned that with the critical monthly payrolls report coming in from the U.S. Bureau of Labor Statistics this Friday, September 4, traders are left in a quandary whether to go geopolitical or monetary.
How can the Street cope with the seasonal effect of September and the elevated levels of energy prices in the market? No one knows yet. The only thing that remains apparent is that the month starts with much reduced trading sentiment.
