Markets are largely pricing in a Federal Reserve decision to keep interest rates unchanged on Wednesday, though a smaller group of investors remains prepared for a surprise increase. Institutions such as Citadel Securities and UBS have flagged 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 major response following a missile strike on U.S. troops in Jordan the previous night.

Following his remarks, oil prices extended their gains, rising from an earlier 4% increase to nearly 7%, with crude trading around $84.63.

Nasdaq 100 futures moved lower, falling about 0.5% before trimming losses to roughly 0.2%.

Bitcoin also pulled back slightly but remained higher for the session at around $64,200.

Zuckerberg Says Blocking Chinese AI Is Not the Answer

Meta CEO Mark Zuckerberg said restricting Chinese artificial intelligence firms in the U.S. would not be an effective strategy.

His comments came after China’s Moonshot AI launched its Kimi K3 model, while U.S. officials raised concerns that the company may have trained the model using technology linked to American AI companies, including OpenAI and Anthropic.

Zuckerberg said the U.S. should instead focus on identifying weaknesses, improving infrastructure, and removing barriers that would allow it to compete more effectively with China in AI development.

Oil Climbs as Iran Conflict Concerns Return

Crude prices moved higher after renewed tensions involving Iran following a reported missile attack targeting U.S. forces in Jordan.

The missiles were reportedly intercepted and caused no damage, but the incident pushed WTI crude oil up 4.3% to $82.68.

Despite the move in energy markets, broader financial markets remained relatively calm. U.S. stock futures pointed to modest gains, while Bitcoin advanced about 1.5% to $64,400.

The Federal Reserve rate decision remained the main focus for investors. Although a pause was widely expected, markets were pricing in roughly a 35% chance of a 25-basis-point rate increase.

Smaller Crypto Tokens Lead Gains Ahead of Fed Decision

Smaller-cap cryptocurrencies outperformed ahead of the Federal Reserve announcement, with several altcoins driving market gains.

Audiera’s BEAT token climbed 28% over 24 hours, becoming the strongest performer among the top 100 cryptocurrencies by market capitalization. Uniswap’s UNI followed with a 7.2% gain, while Jupiter’s JUP rose 7%.

The CoinDesk DeFi Select Index increased 2.8% as traders positioned ahead of the central bank’s decision.

South Korea’s Kospi Drops Further as AI Stocks Slide

South Korea’s benchmark Kospi index fell another 6% on Wednesday, extending a sharp decline that began after the index reached a peak of 9,385 points on June 19. The market has now dropped nearly 40% from that level.

The selloff has been led by major technology companies, including Samsung Electronics and AI chipmaker SK Hynix. Investor enthusiasm for AI-related stocks has weakened worldwide as concerns increase over elevated valuations.

Some analysts believe capital flowing out of overheated AI trades could eventually move into crypto markets.

10x Research suggested that Bitcoin could benefit if investors redirect funds away from AI-related investments as valuations undergo a reset.

ARK Invest Reduces Crypto Exposure While Buying SpaceX

ARK Invest purchased approximately $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 came after SpaceX shares fell 29% over the previous month and traded below their $135 June IPO price.

At the same time, the firm reduced positions in several crypto-linked companies, selling about $4 million worth of Robinhood shares, $2.3 million in Block shares, and $1.6 million in Bullish shares.

ARK also added smaller positions in BitMine and a Solana staking ETF, but the broader portfolio shift favored artificial intelligence and space investments over crypto-related equities.

The move followed Morgan Stanley’s assessment that SpaceX’s recent decline effectively values its AI business at zero, while maintaining a $300 price target.

Bitcoin Volatility Remains Low Despite Fed Uncertainty

Bitcoin’s 30-day annualized implied volatility index (BVIV), often used as a gauge of market anxiety, remains below 40%, significantly lower than the 60%+ levels recorded during major selloffs earlier this year.

The index reflects demand for options and hedging strategies, with the current reading suggesting traders are not expecting major price swings in the short term.

The calm options market contrasts with uncertainty around the Fed decision. While most investors expect rates to remain unchanged, some major institutions, including Citadel, anticipate the possibility of a hike.

The CME FedWatch tool shows approximately a 35% probability of a rate increase, an unusually high level of uncertainty ahead of the meeting.

Bitcoin Holds Above $64,000 Before Fed Announcement

Bitcoin traded above $64,000 during Asian hours on Wednesday, rising about 1% as the broader crypto market moved higher ahead of the Federal Reserve decision.

Ether gained 1.7% to $1,909, while XRP posted the strongest move among major cryptocurrencies with a 2.6% increase.

CME data showed that around 70% of traders expected the Fed to maintain rates between 3.50% and 3.75%, which would mark the sixth consecutive meeting without a change.

However, roughly 30% of market participants were pricing in a quarter-point hike, with Citadel Securities warning clients about a possible surprise increase and UBS also acknowledging that such an outcome remained possible.