Markets are broadly anticipating the Federal Reserve will leave interest rates unchanged at Wednesday’s policy meeting, though a minority of investors are positioning for a potential surprise increase. Financial firms including Citadel Securities and UBS have pointed to the possibility of a rate hike.
Trump’s Iran Comments Push Oil Prices Higher
President Trump said in a Fox News interview that Iran would face a forceful response after a missile attack targeted U.S. troops in Jordan the previous night.
Following the remarks, oil prices accelerated their gains, moving from an earlier 4% increase to nearly 7%, with crude trading around $84.63.
Nasdaq 100 futures declined roughly 0.5% before narrowing losses to about 0.2%.
Bitcoin also pulled back slightly but remained in positive territory for the day, trading near $64,200.
Zuckerberg Opposes U.S. Ban on Chinese AI
Meta CEO Mark Zuckerberg said restricting Chinese artificial intelligence companies in the U.S. would not be an effective strategy.
His comments came after China-based Moonshot AI launched its Kimi K3 model, while U.S. officials raised concerns that the company may have trained the system using technology or data linked to American AI firms, including OpenAI and Anthropic.
Zuckerberg said the U.S. should focus on identifying weaknesses and removing obstacles that prevent it from competing more effectively with China in AI development rather than pursuing broad bans.
Oil Gains Momentum as Iran Tensions Return
Crude prices climbed again after renewed geopolitical concerns involving Iran, following a reported missile attack on U.S. forces in Jordan.
The missiles were reportedly intercepted without causing damage, but the incident pushed WTI crude higher by 4.3% to $82.68.
Despite the jump in energy prices, broader markets showed limited reaction. U.S. equity futures pointed to modest gains, while Bitcoin advanced about 1.5% to $64,400.
Investor attention remained focused on the Federal Reserve’s interest rate decision. While a rate hold remains the market’s base case, traders have assigned around a 35% chance of a 25-basis-point hike.
Altcoins Lead Crypto Market Gains Ahead of Fed Decision
Smaller cryptocurrencies outperformed ahead of the Fed announcement, with several altcoins driving market gains.
Audiera’s BEAT token surged 28% over 24 hours, making it the strongest performer among the top 100 cryptocurrencies by market value. Uniswap’s UNI followed with a 7.2% gain, while Jupiter’s JUP rose 7%.
The CoinDesk DeFi Select Index advanced 2.8% as investors positioned ahead of the central bank decision.
South Korea’s Kospi Extends AI-Driven Selloff
South Korea’s benchmark Kospi index fell another 6% on Wednesday, extending a steep decline that began after the index peaked at 9,385 points on June 19. The market has since lost nearly 40%.
The downturn has been led by sharp declines in major technology names, including Samsung Electronics and AI chip manufacturer SK Hynix. Investor enthusiasm for AI stocks has weakened globally as concerns grow over valuations.
Some analysts believe money exiting overheated AI investments could eventually flow into crypto markets.
10x Research suggested on X that Bitcoin could benefit if investors rotate capital away from AI-related trades as valuations are reassessed.
ARK Invest Rotates Away From Crypto Stocks Toward Space and AI
ARK Invest purchased about $12 million worth of SpaceX shares on Tuesday, adding 105,108 shares across its ETFs as the stock gained 2.6% to $116.41. The purchase followed a 29% monthly decline that pushed the stock well below its June IPO price of $135.
At the same time, the firm reduced exposure to several crypto-related companies, selling around $4 million in Robinhood shares, $2.3 million in Block shares, and $1.6 million in Bullish shares.
ARK also increased smaller positions in BitMine and a Solana staking ETF, but the broader portfolio shift favored artificial intelligence and space-related assets over crypto-linked equities.
The move comes after Morgan Stanley said SpaceX’s recent decline has effectively priced its AI business at zero while maintaining a $300 price target.
Bitcoin Volatility Remains Muted Ahead of Fed Decision
Bitcoin’s 30-day annualized implied volatility index (BVIV), often used as a measure of market anxiety, remains below 40%, significantly lower than the 60%+ levels recorded during major sell-offs earlier in the year.
The index reflects demand for options and hedging strategies, with the current reading suggesting traders are not expecting extreme price swings in the immediate future.
The calm options market contrasts with uncertainty surrounding the Fed decision. Although most investors expect rates to remain unchanged, some major institutions, including Citadel, anticipate the possibility of a hike.
The CME FedWatch tool currently shows roughly a 35% probability of a rate increase, an unusually elevated level of uncertainty ahead of a policy decision.
Bitcoin Holds Above $64,000 Before Fed Announcement
Bitcoin traded above $64,000 during Asian hours on Wednesday, gaining about 1% as crypto markets moved higher ahead of the Federal Reserve’s rate decision.
Ether climbed 1.7% to $1,909, while XRP posted the strongest performance among major cryptocurrencies with a 2.6% gain.
CME data shows approximately 70% of traders expect the Fed to keep rates unchanged at 3.50%–3.75%, marking the sixth consecutive meeting without a policy adjustment.
However, around 30% of market participants are pricing in a quarter-point hike, with Citadel Securities warning clients about a possible surprise increase and UBS also acknowledging that such an outcome cannot be ruled out.
