Oil prices surged past $95 a barrel on September 2 after renewed U.S. strikes near the Strait of Hormuz triggered the deepest market sell-off in weeks, sending the Dow Jones Industrial Average down more than 400 points and pushing Treasury yields to their highest levels since late 2023.
Brent crude, the global benchmark, reached $95.47 a barrel, up 0.87% on the day after jumping 4.6% the previous session. West Texas Intermediate, the U.S. gauge, traded at $90.72, up 0.55%. Oil has risen roughly 20% over the past month as the conflict between the U.S. and Iran has escalated.
The price spike followed a statement from U.S. Central Command confirming that American forces struck 60 targets and protected 18 million barrels of oil transit through the strait. The statement marked the largest volume of crude to pass through the waterway since the U.S.-Israeli war on Iran began.
Shipping traffic collapses
Shipping crossings through the Strait of Hormuz have dropped sharply as hostilities continue. The waterway, which carries close to a fifth of the world oil supply, recorded just 10 vessel crossings on September 2, down from 23 the previous Wednesday and 25 on Thursday.
Daniel Richards, senior economist at Emirates NBD, told The National that any perceived threat to Gulf shipping lanes will keep an oil-risk premium in place. The reduced traffic has created a bottleneck that is forcing rerouting and increasing insurance costs for tankers entering the region. War-risk insurance premiums for vessels transiting the Gulf have surged, with some operators paying multiples of standard rates. The combination of physical risk and financial cost has made many shipping companies reluctant to send vessels through the strait, even when transit is technically possible.
The strait disruption has also lifted refined product prices. Diesel crack spreads hit a record $106 per barrel as refiners struggle to process available crude into usable fuel. Retail diesel prices in the U.S. have reached $5.63 per gallon, approaching levels seen during the worst of the conflict.
Oil analysts at Capital.com said the Hormuz situation has effectively created a two-tier market. Crude that reaches refineries commands premium pricing, while crude stuck in the Gulf trades at a discount. The spread between the two reflects the real cost of the disruption, which goes beyond headline Brent prices.
Stocks and bonds react
The Dow fell 419 points on September 1, closing at 52,766.88, a loss of 0.79%. The S&P 500 dropped 0.71% to 7,631.47, and the Nasdaq Composite fell 1.03% to 26,099.77. The three-day losing streak erased gains from the previous week and left major indexes at their lowest levels in a month.
Treasury yields climbed to their highest close since late 2023. The 10-year yield reflected expectations that the Federal Reserve may raise interest rates to combat inflation driven by higher energy costs. Fed rate hike odds have risen to 64%, according to market pricing, a sharp increase from just two weeks ago.
New York Fed President John Williams told CNBC on September 2 that higher yields reflect economic strength and that he sees inflation moving slowly lower. But he acknowledged that the oil situation creates uncertainty. Friday August nonfarm payrolls report, with analysts expecting 45,000 new jobs, could either reinforce or ease rate-hike fears.
European bond markets have also been under pressure. French OAT yields hit their highest since the 2008 financial crisis, overtaking Italy as investors main concern. German Bund yields topped 3.36%, reflecting the global nature of the rates selloff.
Crypto market impact
The oil and equity selloff spilled into crypto markets. Bitcoin dropped 1.5% to $76,548, while Ethereum fell 3% to $2,368. Solana took the hardest hit, losing 3.4% to $98.01. More than 90,000 leveraged traders were liquidated in 24 hours, wiping out $367.7 million across the market.
Bitcoin ETFs saw $236 million in net outflows on September 1, the first day of the month, after a nine-day streak of positive flows in August. BlackRock IBIT accounted for 85% of the outflows. Ethereum ETFs bucked the trend with $10.95 million in net inflows, extending their streak to 12 consecutive sessions.
The Hormuz disruption has created a two-track dynamic in crypto. Bitcoin, increasingly treated as a risk asset by institutional investors, sold off alongside equities, falling below key technical support levels. The correlation between Bitcoin and the S&P 500 has tightened in recent weeks as macro factors dominate crypto price action. Ethereum ETFs, driven by a separate narrative around institutional accumulation, continued to attract capital.
What comes next
Analysts at Capital.com said renewed hostilities in the Middle East sent crude prices surging, driving Wall Street lower and global bond yields to multi-year highs. The U.S. has signaled it will continue striking Iranian targets, while Iran has vowed retaliation.
Polymarket odds give a 28% chance that Strait of Hormuz traffic returns to normal by December 31, and just 3% by September 30. The low probability of near-term resolution suggests the oil premium will persist, keeping pressure on equities and crypto markets alike. Energy stocks outperformed the broader market on September 2, with major oil companies posting gains even as the rest of the index declined. The divergence reflects the reality that higher oil prices benefit producers while hurting consumers and industries dependent on cheap energy.
Traders are also watching the ADP employment report, which showed weaker-than-expected private payroll growth. The data, combined with the oil spike, has created a stagflationary picture that gives the Fed little room to cut rates and limited ability to ignore rising energy costs.
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