Announced as the enemy of Marvel's wizard in the sequel to Doctor Strange, Nightmare could be the one that will link Sam Raimi's film to WandaVision.
When Kevin Feige announced Phase 4 of the MCU, the Doctor Strange sequel was not necessarily the most anticipated project. And then when Marvel's boss started talking about "horror movies", the title Doctor Strange in the Multiverse of Madness was unveiled, and Sam Raimi was announced as the director, the film immediately became more exciting. In addition to opening the doors to the multiverse, the script for this second instalment of Stephen Strange's adventures (Benedict Cumberbatch) will also have a link to the WandaVision series, currently airing on Disney+, but that's pretty much all that has been unveiled so far.
Before leaving the project along with Scott Derrickson, screenwriter C. Robert Cargill had confirmed in a question-and-answer on Movie Web that Nightmare would be the great villain of Doctor Strange 2 and that Baron Mordo (played by Chiwetel Ejiofor) would be involved in its appearance, but since the film was entrusted to Sam Raimi, radio silence.
It appeared simultaneously as Doctor Strange in issue 110 of Strange Tales in 1963, and Nightmare is the Supreme Wizard's oldest enemy. An ancient demon who reigns over the Dimension of Dreams and absorbs human beings' psychic energy that he torments during their sleep. In addition to locking people in his dimension to torture them, he can also control their bodies and make them hallucinate. Even though he has been defeated several times by Dr Strange and the Marvel universe's heroes, no one can definitively kill him as long as humans continue to dream. A kind of Freddy Krueger that would perfectly suit the horrific atmosphere announced in the film.
Nightmare is one of the Lords of Fear, but he is also one of the servants of Shuma-Gorath, a monstrous creature older than the universe who is trying to conquer the world (like any self-respecting villain). With a Lovecraftian appearance, this demon tried to come to Earth through the Elder, and Dr Strange's spirit was thus forced to kill his mentor, becoming in his turn the Supreme Wizard.
The first two episodes of WandaVision have shown that the superhero couple is evolving well in an alternate reality. Still, Wanda doesn't seem to be fully aware of what's going on around her. Her condition could be caused by hallucinations from Nightmare, which would then make the junction between the Disney+ series and Sam Raimi's movie. The demon could be manipulating Wanda to force her to open a rift between the dimensions and then confront Doctor Strange (or even ally himself with Shuma-Gorath in front of the wizard and the witch).
Eva Green would have been approached at one time to play Nightmare. However, the creative disagreement at the origin of Scott Derrickson's departure would concern precisely the character, whom the filmmaker absolutely wanted as the great villain for his film. In contrast, Kevin Feige wanted it to be Wanda, which is also plausible. Nothing has been revealed about the identity of the one that Doctor Strange will have to face after defeating Dormammu in Doctor Strange, but if it's not Nightmare, we already know who we want to see.