Oil at $112 Kills 2026 Fed Rate Cut Bets as Nasdaq-100 Falls for Fourth Straight Week

Oil Reprices the Entire Rate Path

The US-Iran conflict has been the dominant macro force for three weeks running, but Friday's session marked a qualitative shift. Brent crude settled at $112.19 per barrel, up 3.3% on the day, as reports emerged that the Trump administration was considering seizing Iran's Kharg Island oil terminal to break the Strait of Hormuz blockade. US benchmark crude gained 2.3% to $98.32.

The oil move itself matters, but the second-order effect is what's repricing everything: rate expectations are dead. Before the war, traders were betting on at least two Fed cuts in 2026. As of Friday, CME futures show nearly zero probability of any cut this year, and some desks are now pricing in the possibility of rate *increases* — a scenario that was unthinkable a month ago.

The 10-year Treasury yield jumped to 4.38%, up from 3.97% before the conflict started. That 41 basis point move in three weeks is a direct repricing of the inflation outlook, driven entirely by energy costs. For a tech-heavy index like the Nasdaq-100, where valuations are acutely sensitive to the discount rate, this is the kind of shift that forces a fundamental reassessment of what growth stocks are worth.

The Week's Damage

The Nasdaq-100 fell 1.9% on Friday to close at 23,898, capping its fourth consecutive losing week — the longest such streak in a year. The broader Nasdaq Composite dropped 2.0% to 21,647. The S&P 500 lost 1.5% to 6,506 and the Dow shed 444 points.

Small caps fared worse: the Russell 2000 declined 2.3% and officially slipped into correction territory. The S&P Utilities sector was the day's biggest loser, down over 4%, as the AI power trade unraveled alongside rising energy cost fears.

Adding to the chaos, $5.7 trillion in notional options expired on Friday — the largest March expiry since 1996. That kind of notional rolling into a volatile tape amplifies moves in both directions and likely contributed to the late-session acceleration.

On the single-stock side, Super Micro Computer collapsed 33% after federal prosecutors charged associates with smuggling Nvidia-powered AI servers to China — a reminder that geopolitical risk isn't confined to the Middle East.

What This Changes

The fundamental question is whether oil above $100 is a temporary war premium or the new baseline. If Brent stays in the $100–120 range, the Fed isn't cutting — period. Moody's chief economist Mark Zandi has warned that recession odds sit at 49% before even accounting for the war's full economic impact. That's the worst kind of setup for growth equities: simultaneously higher discount rates and deteriorating earnings expectations.

For XYZ100 perp traders specifically, weekend sessions carry extra risk right now. The underlying Nasdaq-100 only prices during US market hours, but the perp trades around the clock on oracle pricing. Any weekend escalation in the Iran conflict — a strike on energy infrastructure, a Hormuz incident — will show up in oil futures and XYZ100 well before Monday's equity open. That gap-fill dynamic cuts both ways, but the current skew favors downside surprises.

The Nasdaq's approach to correction territory also matters technically. If the index breaks below 23,500, it risks triggering systematic selling from trend-following and volatility-targeting strategies that have already been reducing exposure into the fourth consecutive weekly decline.

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