Global markets face a liquidity squeeze as rising oil prices push Fed rate cut expectations to 2027 and trigger technical breakdowns in equities and silver.
Key takeaways
- Stagflation risk rising sharply: The prolonged US–Iran conflict and closure of the Strait of Hormuz have driven oil prices up ~50% toward $100, fuelling inflation while slowing global growth, raising the risk of a stagflationary environment and potential recession.
- Tighter financial conditions ahead: Higher oil prices are lifting inflation expectations and bond yields, reducing the likelihood of Fed rate cuts (now pushed to 2027), and creating a liquidity squeeze that pressures equities and other risk assets.
- Equities weakening, and downside risks persist: The Nasdaq 100 has entered a technical correction with a bearish double-top breakdown and weakening momentum, suggesting further downside unless key resistance levels are reclaimed.
- Diverging commodity trends: WTI crude remains in a medium-term uptrend supported by supply tightness, while silver is in a bearish phase, vulnerable to further declines if it breaks below key support near its 200-day moving average.
The geopolitical risk arising from the US-Iran war that has entered its 31st day without any clear de-escalation has added another layer of threat:stagflation.
Due to the closure of the Strait of Hormuz, a critical global energy chokepoint where approximately 20% of the world’s total oil supply passes through, leading to a global oil supply crunch that send benchmark oil prices such as WTI crude oil towards $100 per barrel; a significant monthly jump of around 50% at the time of writing, the most since May 2020.
A rise in stagflation risk suggests a potential deadly concoction of higher input costs for businesses and consumers, and later demand destruction via the wealth effect that may trigger a global recession.
Survey-based data have shown signs of economic growth deterioration. The S&P Global’s flash PMI data for March has indicated output growth slowing in all four largest developed economies (G4 – US, UK, Eurozone, and Japan) to 51.2, down from February’s print of 52.2, its weakest level since the announcement of the US’s global reciprocal tariffs in April 2025 (see Fig. 1).
Fig. 1: S&P Global March 2026 flash PMI for G4 economies (Source: S&P Global).
Secondly, higher oil prices have led to a rise in inflationary expectations, which in turn triggered a rise in longer-term sovereign bond yields that can create a higher cost of funding environment that compresses net profit margins for corporations and dampens consumer sentiment, in turn creating a vicious cycle of economic slowdown.
Both the US 5-year and 10-year breakeven inflation rates (a gauge of future inflationary expectations in the US) have drifted higher to 2.56% and 2.31% at this time of writing from the December 2025 low of 2.22% and 2.23%, respectively.
The 10-year US Treasury yield (lagged around two months) has jumped by 48 basis points to its current level of 4.43% from the February 2026 low of 3.95% (see Fig. 2).
Fig. 2: US 5-YR & 10-YR breakeven rates with WTI crude oil as of 27 Mar 2025 (Source: TradingView).
In such a scenario, global central banks are likely to face a challenge to cut interest rates and may choose to stay on the sidelines and even start to hike rates to combat a higher inflationary trend.
Based on the CME FedWatch tool as of Monday, 30 March 2026, the Fed funds futures traders have priced in no interest rate cuts by the Fed in 2026, erasing the earlier two-three interest rate cuts pencilled in at the start of the year, before the US-Iran war started on 28 February 2026.
The Fed funds futures market is now signalling the next interest rate cut of 25 bps to lower the Fed funds rate to 3.25%-3.59% may come much later on the 27 October FOMC meeting in 2027, with a 78% chance (see Fig. 3).
Fig. 3: Fed funds rate probabilities as of 30 March 2026 (Source: CME FedWatch tool).
Hence, higher oil prices are triggering rising inflationary expectations that led to a less dovish Fed, in turn, a further potential jump in the 10-year US Treasury yield, creating a liquidity squeeze environment that does not bode well for risk assets such as equities and precious metals due to higher opportunity costs of owning non-interest income-bearing assets such as gold and silver
Nasdaq 100 has staged a “Double Top” bearish breakdown
Fig. 4: Major benchmark stock indices performances from 27 Feb 2026 to 27 Mar 2026 (Source: MacroMicro).
Fig. 5: US Nasdaq 100 CFD index medium-term trend as of 30 Mar 2026 (Source: TradingView).
Since the start of the US-Iran war (from 28 February 2026 to 27 March 2026), the mega tech-heavy Nasdaq 100 has declined by -7.3% (see Fig. 4), and from its current all-time high printed on 29 October 2025, it has plummeted by -11% at the close of 27 March 2026, Friday, slipping into a technical correction, which is defined as a decline of at least 10%.
Several key technical elements suggest the downside may not be over yet, as the price actions of the US Nasdaq 100 CFD index (a proxy of the Nasdaq 100 E-mini futures) have transformed into a potential medium-term downtrend phase.
It has staged a bearish breakdown of a 5-month bearish “Double Top” configuration on 20 March 2026 with a daily close below its key 200-day moving average on the same day.
In addition, the daily MACD trend indicator has continued to trend downwards below its centreline since 5 February 2026.
Watch the 24,355 key medium-term pivotal resistance on the US Nasdaq 100 CFD index. A break below the 1 Aug 2025 swing low of 22,680 may expose the next medium-term supports at 22,135/22,088 and 21,438/21,293 (see Fig. 5).
However, a clearance and a daily close above 24,355 invalidates the bearish scenario for a potential mean reversion rebound scenario towards the next medium-term resistances at 24,835 and 25,215/25,455.
Silver (XAG/USD) is looking vulnerable to breach below the 200-day MA
Fig. 6: Silver (XAG/USD) index medium-term trend as of 30 Mar 2026 (Source: TradingView).
Since 2 March 2026, silver (XAG/USD) has plunged by 36% to print an intraday low of $61.00 on 23 March 2026, just above the key 200-day moving average
Right now, its price actions are oscillating within a potential bearish “flag” consolidation configuration below its 20-day and 50-day moving averages.
The daily RSI momentum indicator is still flashing out a potential bearish momentum condition below the 50 level and has yet to reach its oversold region (below the 30 level).
Overall, the medium-term downtrend phase for silver (XAG/USD) is likely still intact if $82.05 key medium-term pivotal resistance holds (see Fig. 6).
A break below $61.00 (also close to the 200-day moving average) may increase the odds of an extension of the bearish impulsive down move sequence to expose the next medium-term supports at $54.24 and $45.55.
On the other hand, a clearance and a daily close above $82.05 invalidates the bearish scenario for a potential mean reversion rebound towards the next medium-term resistances at $90.00 and $96.18.
West Texas oil medium-term uptrend remains intact
Fig. 7: West Texas Oil CFD medium-term trend as of 30 Mar 2026 (Source: TradingView).
The recent pull-back seen in the West Texas oil CFD (a proxy of the WTI crude oil futures) from its 4-year high of $119.54 printed on 9 March 2026 has managed to find support at the 20-day moving average.
In addition, the daily MACD trend indicator is about to shape a bullish crossover condition above its centreline.
These observations suggest that the ongoing medium-term uptrend phase remains intact. Watch the $86.50 key medium-term pivotal support, and a clearance above $119.54 sees the next medium-term resistances to come in at $124.40/126.14, $131.30, and $141.37/147.08 (see Fig. 7).
On the flip side, failure to hold and a daily close below $86.50 invalidates the bullish scenario to expose the next medium-term supports at $77.15 and $71.33/66.56
The information presented is historical information, and past performance is not indicative of future performance.
