Global Markets Shift: Oil Drops More Than 2%, US Stocks Hit Session Highs, Gold Strengthens, Bitcoin Lags Behind, Year-End Rate-Hike Bets Remain Elevated

Oil prices fell and global bond yields cooled, pushing risk appetite in financial markets higher. Middle East crude exports resumed, combined with Group of Seven (G7) arrangements to release emergency reserves, easing energy supply concerns. U.S. Treasury yields retreated from levels not seen since 2002, providing support for tech stocks and gold. The S&P 500 and Nasdaq indices hit fresh intraday highs. Meanwhile, the dollar weakened while the euro rebounded, but bitcoin pulled back after failing to break through $87,000, showing that different assets are still responding differently to this round of market changes.

However, the cooling of energy prices has not eliminated Middle East supply risks, and U.S. service sector price pressures remain prominent. While the market has significantly scaled back October rate hike expectations, expectations for another rate hike in December remain elevated. The Federal Reserve's September meeting minutes, due Wednesday, will be the next key test.

Crude Oil: Supply Concerns Ease, Brent Falls Below $98

International oil prices fell on Tuesday, as Middle East crude export resilience and the G7 emergency reserve release plan temporarily outweighed supply concerns from regional conflicts. At 7:46 a.m. Eastern Time, Brent crude fell 2.3% to $97.99 per barrel; U.S. West Texas Intermediate (WTI) crude futures also fell 2.3% to $87.33 per barrel.

Shipping data released Monday showed that Middle East crude exports exceeded pre-war levels for four days during the final week of September, indicating that despite continued attacks on vessels transiting the Strait of Hormuz, regional oil transport has shown some resilience. Meanwhile, the G7 agreed last Friday, coordinated through the International Energy Agency (IEA), to release 100 million barrels of crude oil and diesel from strategic reserves over four months, pledging not to restrict energy exports between member countries.

KCM Trade Chief Analyst Tim Waterer said that Saudi export recovery and strategic reserve releases are easing market anxiety about supply, temporarily limiting oil price increases. However, without a clear diplomatic breakthrough or further substantial improvement in crude export efficiency, oil price support may remain relatively solid.

Regional security risks remain. Yemen's Houthi forces claimed on Monday to have attacked multiple Saudi targets, including King Khalid International Airport in Riyadh, Saudi Aramco's Rabigh refinery, and Abha Airport. Saudi authorities had not immediately confirmed at the time. On the other hand, the Yemeni government said Saudi-backed government forces had recaptured some coastal areas near the Bab-el-Mandeb Strait and Mukha. The military situation and the stalemate in U.S.-Iran talks have kept traders on alert against another shock to Gulf energy supplies.

Bond Market: U.S. Treasury Yields Retreat from 24-Year Highs, Inflation Pressure Unresolved

As oil prices fell, the U.S. Treasury market got some relief. On Tuesday, the 10-year U.S. Treasury yield briefly fell more than 4 basis points to 5.262%, the 30-year yield dropped more than 3 basis points to 5.631%, and the 2-year yield fell about 4 basis points to 4.793%. The day before, the 10-year and 30-year yields had risen to their highest levels since April 2002 and May 2002, respectively.

But the latest economic data still shows a coexistence of slowing growth and elevated price pressures. The Institute for Supply Management (ISM) reported Monday that the September services Purchasing Managers' Index (PMI) fell to 54.9 from August's 55.4, remaining in expansion territory. However, the prices index rose 1.4 points to 74.0, its highest level since July 2022. This indicates that services growth has cooled somewhat, but cost pressures have not subsided simultaneously.

According to intraday pricing on CME FedWatch, the probability of a rate hike of at least 25 basis points in October is approximately 22%, significantly lower than about 51% a week earlier, with the probability of holding rates steady near 80%. However, the December rate hike probability remains above 80%, indicating the market has not fully let go of concerns about further tightening. Investors will focus on the September meeting minutes released Wednesday for clues about policymakers' views on inflation, economic slowdown, and the scope for subsequent rate hikes.

Stocks: Chip Stocks Lead Gains, S&P and Nasdaq Hit Record Intraday Highs

The simultaneous decline in oil prices and U.S. Treasury yields eased some pressure on the stock market, and tech stock gains further drove major indices higher. The S&P 500 hit a fresh intraday high early Tuesday. In related intraday quotes, the S&P 500 rose about 0.8%, the Dow Jones Industrial Average rose 338 points or about 0.7%, the Nasdaq Composite Index rose about 0.8%, and the Nasdaq also touched a new intraday all-time high.

Chip stocks became an important force driving the rally. Marvell Technology shares rose about 7%, Broadcom gained about 4%, and Nvidia rose about 1%. Continued enthusiasm for AI-related investments provided support for the market, while falling energy costs and lower long-term interest rates further improved investor sentiment.

However, bond market volatility remains an important variable for stocks. Morgan Stanley Wealth Management Chief Investment Officer Lisa Shalett noted in a client report that bond market volatility has been notable over the past six weeks, with potential Fed policy framework changes, economic growth prospects, and high oil prices amid the ongoing Middle East conflict all contributing factors. She also noted that while intraday implied volatility has risen, recent volatility has not yet reached the extreme levels that triggered the 2022 stock market bear market.

Forex: Dollar Falls, Euro Rebounds, French Bond Market Pressure Temporarily Eases

The dollar weakened on Tuesday while the euro rebounded from the 17-month low touched the previous session. In related intraday quotes, the euro rose 0.28% to 1.1252, on track for its biggest single-day gain since September 3. The dollar index fell 0.26% to 101.89. The euro had fallen to around 1.116 on Monday, after declining more than 1% the previous week and falling for four consecutive weeks.

Declining energy prices helped European bond markets stabilize, easing market concerns about eurozone fiscal and debt pressures. The 10-year French government bond yield fell about 8 basis points intraday to 4.7824%. Bannockburn Capital Markets Chief Market Strategist Marc Chandler said that Yemeni government forces recapturing some strategic areas pushed oil prices lower, which in turn helped French and Italian bond yields retreat, providing support for the euro's rebound.

France's fiscal deficit and 2027 election prospects continue to attract attention. French presidential candidate Marine Le Pen raised her proposed fiscal austerity amount from 125 billion euros to 140 billion euros on Tuesday. Meanwhile, political uncertainty from Spain's early election also constituted the backdrop for the euro's recent weakness.

The dollar's decline also drove the pound higher, with sterling rising 0.39% to 1.327, having touched a one-week high of 1.3283 intraday. The yen performed relatively weakly, with the dollar rising about 0.05% against the yen to 157.98. Sources said the Bank of Japan may signal this month that underlying inflation has broadly reached the 2% target, preparing for another rate hike in the coming months. Bank of Japan Governor Kazuo Ueda also emphasized that stabilizing underlying inflation around 2% is becoming increasingly important.

Precious Metals: Dollar and Yield Decline Support Gold, Institutions Still Bullish on Long-Term Outlook

Gold rose slightly on Tuesday, supported by dollar weakness and falling U.S. Treasury yields. Spot gold rose 0.6% to $4,165.45 per ounce; U.S. gold futures for December delivery rose 0.6% to $4,182.30 per ounce.

American Gold Exchange Market Analyst Jim Wyckoff said that turmoil in the French bond market and concerns about the U.S. Treasury market are bringing some safe-haven demand for gold. The dollar's decline also reduced the cost of gold purchases for non-dollar investors, while falling yields eased the opportunity cost of holding non-interest-bearing assets.

However, year-end rate hike expectations still limit gold's rebound. Although September's weaker-than-expected employment growth prompted the market to scale back October rate hike expectations, expectations for December tightening remain elevated. Whether the Fed meeting minutes can further change rate path expectations will affect gold's subsequent trajectory.

TD Securities analysts said in a report that despite short-term headwinds for gold, continued ETF buying and retail investor demand still provide support. The institution maintains its view that gold will rise above $5,000 per ounce by 2027, which represents its medium-to-long-term judgment based on factors such as investment demand.

Cryptocurrency: Bitcoin Blocked Again at $87,000, ETF Funds Turn to Outflows

Bitcoin failed to sustain its previous upward momentum on Tuesday, pulling back to about $85,500 after failing again to break through $87,000. CoinGecko data shows its 24-hour trading range was approximately $85,010 to $86,662, with a market cap of about $1.72 trillion. Exactly one year after setting an all-time high of $126,080 on October 6, 2025, Bitcoin remains about 32.2% below that record.

Over the past two weeks, Bitcoin has mainly fluctuated between $83,000 and $87,000. Analyst Daan Crypto Trades said that $85,000 has repeatedly become a battleground between longs and shorts, with liquidity concentration both near $87,000 above and the $83,000 area below. Breaking through either end of the range could bring more significant price volatility.

Analyst Ali Martinez, citing Glassnode on-chain data, noted that $83,300 to $84,600 is an important support zone, corresponding to approximately 1.59 million Bitcoin's on-chain turnover distribution. He views $86,700 as a key position buyers need to break through, and believes a valid breakout could bring $100,000 back into focus as a target. However, this judgment still depends on whether the breakout can be sustained and the subsequent buying momentum.

In terms of fund flows, SoSoValue data shows that U.S. spot Bitcoin ETFs recorded a net outflow of $89.9 million on October 5, ending the previous two consecutive trading days of combined net inflows of approximately $293 million. BlackRock's IBIT was the only fund that recorded net inflows that day, attracting approximately $69.9 million. ARK Invest and 21Shares' ARKB had net outflows of approximately $85.2 million, the largest source of outflows that day.

Meanwhile, Martinez cited Santiment data saying that since October 1, large holders have accumulated more than 14,335 Bitcoin, worth approximately $1.22 billion based on the prices used in his analysis. The contrasting signals of large holder accumulation and ETF outflows form different directional flows. Whether Bitcoin can hold the $83,000 to $85,000 zone and effectively break through the $86,700 to $87,000 resistance remains the focus of market attention.