The resurgence of the Iran war premium has had a significant impact on the cryptocurrency market. Over the past 24 hours, bitcoin has fallen 2.1% to $75,633, with a weekly decline of 3%. This downturn is largely attributed to the surge in Brent crude oil prices, which have jumped 7.1% to $126.41 per barrel - the highest level in four years. The primary driver behind this surge is an Axios report stating that President Donald Trump is set to receive a briefing on new military options against Iran.
The potential deployment of hypersonic missiles to the Middle East, as requested by U.S. Central Command, would mark the first time American forces have utilized these weapons in combat. The Strait of Hormuz has been effectively shut down since the onset of the war, severely limiting the flow of crude oil, natural gas, and other oil products.
As a result, a war premium has been factored into the price of Brent crude, with prices increasing by over 100% year-to-date. The global benchmark has now seen a nine-day winning streak, the longest since May 2022. Other cryptocurrencies have also been affected, with ether dropping 3.4% to $2,244, XRP falling 2.1% to $1.37, and Solana losing 2.6% to $82.62. In contrast, dogecoin has seen a 3.8% increase in value over the past day, reaching $0.10.
Risk assets have also experienced a decline, with the Nasdaq 100 futures erasing earlier gains and the MSCI's Asia Pacific share index falling 1.4%. The surge in oil prices and a hawkish Fed have led to a decrease in demand for fixed income, resulting in the dollar gaining value and bonds sliding.
The 10-year Treasury yields have held near their highest level since July, while Japan's 10-year notes have reached their highest level since 1997. Bitcoin's ability to withstand the early stages of the war is being tested, with the asset holding a tight band between $74,000 and $78,000 despite the significant increase in oil prices.
Fernando Lillo, director at exchange Zoomex, notes that any break above $80,000 will require the war premium to unwind. According to Lillo, a resolution to the Middle East conflict and a subsequent drop in Brent crude oil prices below $100 per barrel are necessary for bitcoin to break the key $80,000 level. He also suggests that a potential lifting of restrictions in the region and lower oil prices could trigger an influx of capital into risk assets, paving the way for bitcoin to consolidate above $80,000 and move towards $85,000.