Cryptocurrencies Decline as Tensions Between the US and Iran Intensify, Oil Prices Surge

The return of Middle East risk has been better absorbed by Bitcoin compared to oil or equities. On Monday, Bitcoin traded at $74,335, experiencing a 1.6% decline over 24 hours but still maintaining a 4.8% weekly gain. This occurred after the US Navy seized an Iranian ship and Tehran reimposed controls on the Strait of Hormuz over the weekend. Ether and Solana also slipped, with declines of 2.6% and 1.5%, respectively, while BNB remained stable at $618. The broader top-10 cryptocurrencies showed red across the board, but none of the moves exceeded a 3% drop. In contrast, Brent crude surged 5.7% to $95.50 per barrel, and European natural gas futures saw an 11% increase. S&P 500 futures fell 0.6% after the previous day's record close, and European equity futures indicated a 1.2% decline at the open. Gold prices decreased by 0.8% to $4,790, and the dollar saw a slight increase due to traditional war-hedge demand. The recent escalation reversed a three-week unwind of war risk premium, which had led to the S&P 500's record close and a broad rally across emerging markets on Friday. The pattern of diminishing sell-offs in crypto continues, with each successive flare-up resulting in a smaller reaction. This suggests that crypto may have largely priced in the geopolitical tail risk, whereas traditional markets are still reacting to each new headline.