You are probably right about the lack of oxygen causing sleep disturbance and nightmares but you should also check all your medications for all conditions that you may have.
Numerous medications can cause nightmares.

And one more thing is that weird dreams is a symptom of Sleep Apnea. Your brain is affected when you're hypoxic. That gets much better after a few weeks of treatment, but I still have vivid dreams about loss. But that's ok and maybe soothing in a way.💞

I think everyone with COPD should have a sleep study to see if you're having episodes of Sleep Apnea. That's when you stop breathing temporarily when you're sleeping. It can happen many times an hour. A study will also tell you if your oxygen level goes down and other things pertaining to your nightly sleep. I was starting to fall asleep during the day when I had my study seven years ago. It was ruining my life. I call it my love/hate relationship with my CPAP. But there's plenty of people who don't have COPD that have Sleep Apnea. And yeah it's a drag too, gotta keep distilled water in the house, lol

Good morning, I don't know if its normal or not but I have the same issue and for me sometimes my nightmares can get a little scary what I mean by that it wakes me up out of my sleep and I can account what took place in the dream. I can't blame it on my medication but I seem to ask myself what am I thinking about to have these types of nightmares and I still don't have an answer, so when you a solution to this issue, I'd love to hear about it. Have a bless day, breathe easy😏

Traumatic events can go into our subconscious minds, causing reoccurring nightmares. When I was younger, I used to have the same reoccurring nightmares, missing too much school and not being able to graduate from my high school with everyone. Falling off a cliff ,waking up before I hit the bottom. Some about an ex-husband. The worst one I used to have, it had to do with my mother, and I would wake up screaming . But the content of the nightmare made no sense. This happened every month, and scared my husband to death. After she passed away, I have never had that dream again.
I’ve heard some people say that they take melatonin and have nightmares.