U.S. stocks retreated Thursday after oil prices surged above $100 a barrel, intensifying inflation fears as the Middle East war entered its seventh month. The Dow Jones Industrial Average dropped 221 points, or 0.6%, while the S&P 500 fell 0.7% and the Nasdaq Composite slid 0.8%. U.S. West Texas Intermediate futures for October jumped above $100 per barrel, and Brent crude for November delivery spiked above $105. The rally pushed the 10-year Treasury yield above 4.9%, its highest since November 2023. High-beta chip stocks led declines, with Intel and Micron Technology falling 6% and 4% respectively.

A tame August producer price index report, rising 0.4% monthly and 5.4% annually, failed to calm markets ahead of Friday's crucial consumer price index data. Both feed into the Fed's preferred PCE gauge, due after the September 16 rate decision. Stephen Coltman, head of macro at 21shares, noted the PPI was inconclusive on the "hike or no hike" question, but oil above $100 and rising yields raised the stakes. Fed funds futures priced a 74% chance of a quarter-point hike next week.

Markets also digested the Treasury Department's plan to buy back up to $6 billion in longer-term debt, triple the usual amount. Separately, Nasdaq's venture arm invested $100 million in Payward, parent of Kraken, to launch tokenized equities trading in Q2 2027.