Nasdaq 100: US Indices Eye Oil Risk as Stock Market Forecast Turns Cautious

Stocks Lower at Mid-Session

The major U.S. stock indexes are lower at the mid-session on Wednesday as investors continue to focus on the war in the Middle East and oil prices. Despite the optimism from earlier in the week, today’s price action suggests investors are pricing in worsening conditions over the short-term. Volatility is expected to remain elevated as investors struggle to figure out when the war will end and how long will it take oil production and shipping in the region to recover.

President Trump triggered the recent turnaround when he said the war will end very soon. Prolonged attacks in the area may be causing investors to lose patience, though. To me, Trump’s remark is looking more like an emotional response to a reporter’s question rather than something fact-based.

Stock market investors are keeping a close eye on oil, especially the key $100 level. The longer the rally persists, the greater the risk to company revenue and earnings. A prolonged move over $100 can also drag down global growth and may even force central banks to rethink policy.

The strength in the U.S. stock market over the past few years has been partially fueled by expectations of two, maybe three rate cuts in 2026. Higher oil prices can wipe out all expectations, but right now they are pushing the first rate cut into July.

Short-Term Relief

The announcement of the release of oil from strategic reserves may provide some temporary relief to oil prices, which could be supportive for stocks, but investors are starting to look beyond the short-term with some positioning for a long-term problem.

The Technical Picture

The March E-mini Nasdaq-100 Index futures contract is reflecting the uncertainty in the market. It is currently trapped between 50-day moving average resistance at 25356.00 and 200-day moving average support at 24647.50.

Bullish Scenario

That’s the bet traders are making right now. A sell-off in crude oil could be the bullish news investors need to launch a breakout rally over the 50-day moving average. This would set up the market for a possible retest of the record high at 26670.00.

Bearish Scenario

However, an escalation of the war and further shutdowns in the region could lead to another breakdown under the 200-day moving average. That was only a spike down to 24000.00 on Monday. A prolonged breakdown under this long-term indicator with sellers coming in with conviction could lead to an even stronger sell-off with 23000.00 a strong possibility.

The catalyst for any prolonged rally or any prolonged sell-off will be crude oil prices and essentially the $100 price level.

More Information in our Economic Calendar.