Equities Rally on Fed Pause Hopes; Oil Surges on Iran-Kuwait Strikes

Market Snapshot

S&P 500 (SPY) — 773.17 (+1.05%) [Twelve Data] · Nasdaq 100 (QQQ) — 717.67 (+1.19%) [Twelve Data] · Dow Jones (DIA) — 536.93 (+1.19%) [Twelve Data] · Bitcoin (BTC) — 81,007.76 (+4.19%) [Binance US] · Ethereum (ETH) — 2,514.86 (+4.65%) [Binance US] · Gold (GLD) — 410.22 (+1.85%) [Twelve Data] · US Oil (USO) — 142.09 (+0.67%) [Twelve Data]

Stock Markets

U.S. equities surged Thursday, with the Dow Jones Industrial Average climbing more than 600 points as Federal Reserve Governor Christopher Waller's remarks eased concerns about further monetary tightening. According to Reuters, Waller stated he would be inclined to leave interest rates unchanged as long as inflation continues to slow, with particular focus on the upcoming September 11 inflation report. The comments triggered a sharp repricing of rate expectations, with CME's FedWatch tool showing the probability of a September hike falling to 50.4% from 63.2% the previous day.

The rally marked the S&P 500's best session since early August, with all three major indices gaining at least 1.05%. According to CNBC, the bond market drove equity direction throughout the session—a dynamic that host Jim Cramer described as rare, noting "it's very unusual to see the stock market being such a lapdog to the bond market." Treasury yields moved lower across the curve as traders digested Waller's dovish tilt, with the 10-year note yield falling after a sharp global bond sell-off earlier in the week.

Friday's August payrolls report looms as the next major catalyst. According to CNBC, analysts at EY-Parthenon flagged a key downside risk: the expiration of Temporary Protected Status work authorization for Haitian nationals, which could artificially depress headline job creation. Markets are positioned for the data to influence the Fed's September 16-17 policy meeting, though Waller's emphasis on inflation over employment suggests the upcoming CPI print may carry more weight in determining the central bank's next move.

Gold & Commodities

Gold advanced 1.85% Thursday, holding steady near $4,477 per ounce as geopolitical tensions and central bank reserve shifts reinforced safe-haven demand. According to CNBC, the Dutch central bank (DNB) moved approximately 86 tons of gold from vaults in New York and Ottawa to the Bank of England in London, citing "rising geopolitical risks" and the need to strengthen crisis preparedness. DNB stated that gold stored with the Bank of England is more readily tradable, allowing faster deployment in a severe crisis.

The move reflects broader concerns about financial system fragility and geopolitical realignment. Silver outpaced gold with a 2.51% gain, while natural gas bucked the commodity rally, falling 2.42% on the session. According to CNBC, spot gold was poised for a small weekly gain as traders awaited Friday's U.S. payrolls data for clues on the Federal Reserve's next rate decision. Traders are pricing in an approximately 50% chance of a September hike, down from higher probabilities earlier in the week following Waller's comments on inflation progress.

Oil

Oil prices surged Thursday as Iran fired missiles and drones at Kuwait, escalating Middle East tensions and raising supply-disruption fears. According to CNBC, Brent crude futures rose 57 cents to $96.20 per barrel, while West Texas Intermediate traded 85 cents higher at $91.86. The strikes on a U.S. Gulf ally mark a significant intensification of hostilities in the region, with Kuwait intercepting incoming projectiles.

According to Reuters, oil is on track for the steepest weekly gain since mid-July, with Brent up 7.1% and WTI climbing 9.8% for the week. The renewed U.S.-Iran conflict has heightened concerns over potential disruptions to Middle East crude flows, particularly through the Strait of Hormuz, a critical chokepoint for global energy supplies. Reuters reported that U.S. diesel prices hit record highs Thursday, with the national average jumping as a global supply crunch intensified. The diesel crack spread—the refining margin between crude and diesel—reached a record intraday $108.02 per barrel on Wednesday, driven by disruptions from Ukrainian attacks on Russian refineries, a major source of diesel exports, compounding the impact of Middle East tensions.

Crypto Markets

Digital assets rallied sharply Thursday, with Bitcoin climbing 4.19% to $81,007.76 and Ethereum advancing 4.65% to $2,514.86, tracking the broader risk-on sentiment in equities following Waller's dovish Fed comments. XRP led major tokens with a 6.50% gain, while Solana rose 3.18% and BNB added 4.12%. The synchronized move across crypto and traditional risk assets suggests macro liquidity concerns—rather than crypto-specific catalysts—remain the primary driver of digital asset prices.

The rally comes as institutional infrastructure continues to expand. According to CoinDesk, a law firm and tokenization platform are planning test issuance of catastrophe bonds on blockchain in early 2027, with a proposed structure that would give investors legal ownership of cat bonds onchain and potentially lower minimum investments to $5,000 from current institutional thresholds. The initiative reflects growing momentum behind real-world asset tokenization, though regulatory clarity remains a prerequisite for broader adoption. According to CNBC, an English non-league soccer club purchased by Bitcoin podcaster Peter McCormack in 2022 has placed Bitcoin at the heart of its business strategy, illustrating crypto's expanding footprint beyond pure financial applications.

Macro & Global Drivers

Federal Reserve policy expectations shifted materially Thursday after Governor Christopher Waller signaled openness to holding rates steady if inflation continues to moderate. According to the Associated Press, Waller stated that if the September 11 inflation report shows continued cooling, he would be willing to keep the Fed's benchmark rate unchanged. The remarks suggest a September rate hike is not a foregone conclusion, despite Fed Chair Kevin Warsh's hawkish tone at the Jackson Hole symposium last week. According to Bloomberg, Treasuries rose following Waller's comments, with the rally concentrated in the front end of the curve as traders repriced near-term policy expectations.

According to Reuters, the European Central Bank is expected to raise interest rates on September 10 for the second and final time in what would be its shortest hiking campaign in 15 years, based on a Reuters poll of economists. The divergence between ECB and Fed policy trajectories reflects differing inflation dynamics and growth outlooks across major economies. In currency markets, the Japanese yen jumped more than 1% against the dollar Thursday, briefly reaching 156.34—its strongest level in a month—reviving speculation about possible intervention after Japan spent a record 15.4 trillion yen between July 30 and August 26, according to CNBC. Market participants noted the move likely reflected positioning adjustments rather than confirmed official action.

Geopolitical risks remain elevated. According to Reuters, President Trump stated the U.S. will seek back payment from Europe for Ukraine aid, adding friction to transatlantic relations. Meanwhile, Vietnam's President To Lam is scheduled to visit Russia, France, and the United States this month, according to Reuters, reflecting Hanoi's continued balancing act between major powers. According to Reuters commentary, hedge funds now pose a greater threat to U.S. Treasuries than foreign central banks, with leveraged positioning creating potential for sharp dislocations in bond markets—a structural shift from the prior decade when Chinese reserve management dominated Treasury flow analysis.

What to Watch Next

Friday's August payrolls report will test whether Waller's dovish pivot gains traction within the broader Federal Open Market Committee, with the September 11 CPI print likely carrying even greater weight for the September 16-17 policy meeting. Oil markets remain sensitive to further escalation in U.S.-Iran tensions, particularly any threats to Strait of Hormuz shipping lanes. Equity volatility may persist as traders navigate the tension between improving rate expectations and elevated geopolitical risk.