Oil nears $100 and the Dow sheds 617 points after the holiday

Good morning. Wall Street came back from the Labor Day break with a thud. The Dow fell 1.16% to 52,797, a drop of more than 600 points, and the S&P 500 lost nearly 0.6%.

Oil was the culprit. Saudi Arabia said Yemen's Houthi rebels struck its energy sites, and Brent crude climbed to the edge of $100 a barrel. The US also hit more Iranian tankers and sanctioned 27 Iranian airlines. Markets had mostly shrugged off Middle East headlines until now, but that attitude seems to shift as $100 gets close. Some argue the worry is overdone, since oil is still below its April peak.

Oil leads straight to the Fed. Higher fuel costs push up prices, which raises the odds of a rate hike. The committee itself is split: three members dissented in favor of holding at the July meeting. Mohamed El-Erian says oil-driven inflation is not something the Fed should answer with a hike, while others think stocks could absorb a quarter-point increase.

On top of that, the yen jumped to a six-month high, stoking fears of an unwind of the carry trade, where investors borrow cheap yen to invest elsewhere, and Canada began applying retaliatory tariffs on $20 billion of US goods today. All eyes are on Friday's August consumer price report.