US equities react to de-escalation as oil falls and FOMC looms

Middle East de-escalation lifts US markets ahead of pivotal Fed week

United States (US) equity markets closed mixed on Friday night as investors weighed ongoing artificial intelligence (AI) spending concerns against a glimmer of hope for a diplomatic off-ramp in the Middle East. That hope came in the shape of reports that China was pushing to revive stalled peace talks between Washington and Tehran. 

This was followed over the weekend by the notable absence of US strikes on Iran after a 13th consecutive night of strikes on 24 July. This development resulted in Iran announcing it had paused its retaliatory strikes, and reports emerged that US and Iranian mediators were exchanging messages. 

The combination of these events marks the first concrete sign of de-escalation since tensions began rising earlier this month, which resulted in WTI crude oil surging some 33% into last week's $93.50 high. A portion of those gains has since been erased with crude oil falling 8% at one point this morning following its reopening and  Nasdaq futures jumping by 450 points (1.60%). 

This comes ahead of an enormous week of earnings, with around 36% of the Russell 1000 by market capitalisation due to report. Wednesday brings Microsoft (previewed here), Meta, ARM and Qualcomm. Thursday is headlined by Apple (previewed here), Amazon and Coinbase, before energy names Chevron and ExxonMobil round out the week. 

Meanwhile, Thursday morning's Federal Open Market Committee (FOMC) meeting, previewed below, is shaping up as one of the more interesting in recent memory. 

US: Fed interest rate decision 

Date: Thursday, 30 July at 4.00am AEST

To recap – at its June meeting, under new Chair Kevin Warsh, the FOMC kept the target range for the federal funds rate at 3.50% – 3.75% and delivered a hawkish surprise. The updated dot plot showed nine officials now expecting at least one rate hike by the end of 2026, while the statement removed previous easing language. 

Warsh was notably direct in his press conference, repeatedly stressing 'price stability' and signalling that he wants markets to react to the data rather than front-run forward guidance. 

Since the June FOMC meeting, inflation data has been cooler than expected. The June consumer price index (CPI) report showed headline inflation falling to 3.5% year-on-year (YoY) from 4.2% in May – the first decline in five months and below forecasts of 3.8%. Core inflation eased to 2.6% from 2.9%, below expectations of 2.8%, driven by softer shelter costs and easing in categories such as airline fares, apparel, medical care and household furnishings. 

However, the 33.5% rally in crude oil prices this month has reignited inflationary concerns and triggered a hawkish repricing in the US rates market. The US rates market closed on Friday pricing in a 34% chance of a 25 basis points (bp) hike at next week's FOMC meeting, with two full 25 bp hikes priced by January 2027. 

While this means there is a non-negligible chance the Federal Reserve (Fed) delivers its first rate hike next week since July 2023, the most likely outcome is for a hawkish hold – with perhaps two or three members dissenting and voting for a hike. 

Fed funds rate chart 

Nasdaq 100 technical analysis

From its late-March low of 22,841, the Nasdaq 100 launched a powerful 35% rally in just over nine weeks to reach a record high of 30,762 in early June. The move was very much in line with our bullish outlook back in mid-April, although it hit the 30,000 target some six months earlier than we had anticipated. 

The correction since then continues to evolve with the Nasdaq 100 on Friday night edging lower towards key trend channel and wave equality support now near 28,000 - 27,800ish. 

We are looking for signs of basing in that support area to set the foundations for the uptrend to resume and for a retest and eventual break of the 30,762-record high, with scope to extend toward 32,000. 

Conversely, a sustained loss of support in the 28,000 - 27,800 zone would warn that a deeper pullback toward the 200-day moving average (MA) at 26,336 is underway. 

Nasdaq 100 daily candlestick chart

Dow Jones technical analysis

From its late-March low of 45,063, the Dow Jones staged an impressive rally, surging 14.5% in just over nine weeks to reach a fresh record high of 51,665 in early June. 

After a brief pullback that found support at the psychologically important 50,000 level into mid-June, the index regrouped and hit a fresh record high of 53,294 in early July. 

The pullback from 53,294 has unfolded in a corrective manner into the band of support at 51,600 – 51,300 that we have highlighted in recent reports (including here). This zone includes the early-June highs and late-June lows. Providing the Dow Jones holds above here, the uptrend remains intact, with the possibility of a push toward fresh record highs near 54,000. 

Aware that if the Dow Jones were to lose the band of support in the 51,600 - 51,300 area, it would indicate that a deeper decline and retest of support at 50,000 is underway. 

Dow Jones daily candlestick chart

• _{Source: TradingView. The figures stated are as of 27 July 2026. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}