Nasdaq Gains Under Threat as Oil Prices Rise and Rate Hike Bets Increase

The Nasdaq has been on a tear after the recent FOMC decision, but its gains are at risk of being erased due to increasing oil prices and bets of a Fed rate hike.

Initially, the Nasdaq was supported into new record highs following the Fed's projection of a less hawkish interest rate path. Additionally, a drop in oil prices on growing expectations of a de-escalation and an earlier end to the conflict also contributed to the risk sentiment remaining bid into new highs.

However, Trump's comments at the UN General Assembly poured cold water on those expectations, leading to a deterioration in the general risk sentiment. As oil prices began rising again, the Nasdaq was dragged lower, and the bearish momentum increased after the US Flash PMIs showed stronger growth than expected, triggering another hawkish repricing that sent Treasury yields to new highs.

The focus will remain on interest rate expectations and Middle East developments. If markets sense an earlier end to the war or a surprising breakthrough, oil prices may decline, leading to a dovish repricing and supporting the Nasdaq. Conversely, if things remain unchanged or re-escalate, crude oil is expected to remain supported into new highs, weighing on the stock market as rate hike bets increase.