Let’s also talk about crude oil.

However, Japan’s situation is unique: its government debt is extraordinarily large. As the benefits of globalization fade, rising inflation has pushed up interest rates, sharply amplifying debt-servicing pressures. Japan faces two options for responding to this crisis: selling U.S. Treasuries to buy back yen, or raising interest rates and enduring economic contraction. Selling U.S. Treasuries would disrupt the U.S. bond market—a scenario the United States wishes to avoid. As a core U.S. ally, Japan’s financial vulnerabilities cannot be allowed to erupt unchecked. Thus, the U.S. and Japan have coordinated intervention, pulling the yen back from above 160 to below 156. Currency intervention is only a surface-level measure. To genuinely alleviate Japan’s imported inflation and reduce both debt and broader economic pressures, oil prices must fall. A decline in oil prices directly lowers Japan’s energy import costs, curbs inflation, constrains upward pressure on interest rates, and strengthens the economic foundation of the U.S.–Japan alliance. Lowering oil prices has thus become an inevitable, pragmatic objective in the U.S.–Japan coordinated strategy. Second, the AI segment of U.S. equities is undergoing a cyclical shift—and sustaining the Nasdaq likewise requires lower oil prices. In the early phase of the Iran conflict, rising oil prices hurt overseas industrial economies, prompting capital to flow back into the United States and pour into the AI sector—boosting the Nasdaq. But the AI supply chain has now reached its cyclical peak and entered a phase of bubble deflation. Even if geopolitical tensions flare again and oil prices surge, it is unlikely to attract meaningful new capital into the technology sector. The logic has reversed: high oil prices reignite inflation and push up interest rates—thereby pressuring high-valuation AI assets. To stabilize the Nasdaq, oil prices must fall—bringing down both inflation and long-end yields. Recent market action has already validated this logic: sharp declines in oil prices have coincided with strength in the Nasdaq. Preserving the valuation of tech assets thus constitutes the second compelling reason why oil prices must decline. Third, Gulf allies’ fiscal positions are nearing breaking point—objectively requiring the unimpeded flow of oil exports. Reports indicate that disrupted shipping through key straits has hindered crude exports for some Gulf producers, forcing them to rely on increased sovereign bond issuance to sustain fiscal operations. Crude oil exports are the lifeline of Gulf states; the United States cannot afford to stand by as its allies continue hemorrhaging funds.

The correlation between crude oil and the Nasdaq has completely reversed: the macro logic driving markets has shifted.

Over the past one to two months, markets followed a clear联动 pattern: escalation of the Iran–Middle East geopolitical conflict triggered a rapid rise in crude oil prices—and the Nasdaq Index rose in tandem. The underlying mechanism was this: high oil prices battered global traditional manufacturing, squeezing economies such as those of Europe, Japan, and South Korea; global risk-averse capital flowed outward and continuously returned to the United States, concentrating in the AI and technology sector—lifting the Nasdaq. In this phase, geopolitical tension and rising oil prices were effectively bullish for U.S. tech stocks. Yet last week, this prior linkage broke down entirely. Even as the Iran conflict escalated again and oil prices surged, neither the Nasdaq nor the South Korean stock market rose—in fact, both weakened and declined. High oil prices can no longer drive capital inflows into the AI sector; the positive ‘lift’ previously conferred by geopolitical-driven price spikes has essentially vanished. In the most recent trading sessions, market logic has undergone a complete reversal: crude oil plunged 7% in a single day, rapidly eroding geopolitical risk premiums—yet Nasdaq futures surged sharply. Falling oil prices are no longer negative for tech stocks; instead, they have become a positive catalyst for the Nasdaq. This reversal stems fundamentally from the AI industry’s own cycle having entered a downward phase—and the sector’s potential returns having fallen markedly. In the prior stage, AI was in an expansionary upcycle—its industry momentum strong enough to entice investors to pile in during periods of global risk aversion. But after a substantial rally, AI valuations now sit at elevated levels, while expectations for capital expenditure returns continue to be revised downward. Consequently, these long-duration, high-valuation growth assets have become significantly more sensitive to inflation and interest-rate movements. At this juncture, the negative pressure from rising oil prices now outweighs the benefits from capital repatriation: higher oil prices lift broad-based inflation expectations and push up U.S. Treasury yields—while growth assets like AI, which are priced on distant future cash flows, are extremely sensitive to rising yields, facing immediate discounting pressure that suppresses valuations. Simultaneously, surging energy costs for data centers further squeeze profit margins across the AI supply chain.

Nasdaq Futures Lead Wall St Gains as Oil Retreat Eases Inflation Worries

4 days ago

Oil prices fell nearly 2%, easing inflation concerns and boosting Wall Street gains, while Xenon Pharmaceuticals shares tumbled 28% after pausing clinical trials for a depression drug.

reuters

2026-09-18

Nasdaq Futures Lead Wall St Gains as Oil Retreat Eases Inflation Worries

Nasdaq Futures Lead Wall St Gains as Oil Retreat Eases Inflation Worries

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