Dow drops 500 points as oil prices climb, US-Canada trade tensions escalate

US stocks fell on Tuesday, September 8, as Wall Street returned from the Labor Day holiday to a shortened trading week, with rising oil prices, escalating US-Canada trade tensions and renewed inflation concerns weighing on investor sentiment.

The Dow Jones Industrial Average fell 511 points, or 0.7%, while the S&P 500 declined 0.2%. The tech-heavy Nasdaq Composite slipped 0.1%.

Oil prices climbed to six-week highs after the US and Iran exchanged strikes over the weekend, adding to concerns that prolonged conflict in West Asia could push energy costs higher and reignite inflationary pressures.

Brent crude futures rose 2.3% to $99.22 a barrel, while US West Texas Intermediate (WTI) crude gained 3.3% to $94.54. Iran's efforts to reach an agreement with Oman to manage traffic through the Strait of Hormuz also remained in focus.

The surge in crude prices has raised concerns over the inflation outlook and the Federal Reserve's interest-rate path, particularly after a stronger-than-expected August jobs report. Investors are now awaiting Friday's Consumer Price Index data for further clues on whether inflation is moving closer to the Fed's 2% target.

Treasury yields have also moved higher amid concerns that elevated energy prices could fuel inflation. The benchmark 10-year Treasury yield last week rose to its highest level since November 2023, while the two-year yield reached its highest level since January 2025.

Meanwhile, trade tensions between the US and Canada escalated after Ottawa imposed tariffs of up to 50% on certain US goods. The measures cover around $20 billion of US products, including dairy, steel and wood, adding another layer of uncertainty for investors.

In the technology sector, chip stocks provided some support. Nasdaq-100 futures rose 0.2% in premarket trading, while the iShares Semiconductor ETF gained 1.7%. Nvidia rose 0.7%, Broadcom advanced 1.1% and Intel jumped 4.7%.

Investors are also looking ahead to corporate earnings this week, with Oracle's results due later in the week. GameStop is scheduled to report earnings on Tuesday.

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