The resurgence of the Iran war premium has had a profound impact on the cryptocurrency market. Over the past 24 hours, bitcoin has declined by 2.1% to $75,633, while ether has fallen by 3.4%. This downturn is largely attributed to the surge in Brent crude oil prices, which have jumped 7.1% to $126.41 a barrel - the highest level in four years.
The primary catalyst for this increase is the potential for military action in the Middle East, with reports suggesting that President Donald Trump is set to receive a briefing on new military options against Iran. Furthermore, the deployment of hypersonic missiles to the Middle East has been requested by U.S. Central Command, which 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 impacting the flow of crude oil, natural gas, and other petroleum products.
As a result, a war premium has been factored into the price of Brent crude, driving prices up by over 100% year-to-date. The global benchmark has been on a nine-day winning streak, with prices reaching their highest level since May 2022.
Other cryptocurrencies, including XRP and Solana, have also experienced declines, with XRP falling by 2.1% to $1.37 and Solana losing 2.6% to $82.62. In contrast, dogecoin has seen a significant increase, rising by 3.8% on the day and 10.1% on the week to $0.10. The downturn in the cryptocurrency market is reflective of a broader trend, with risk assets experiencing losses across the board.
The surge in oil prices, combined with a hawkish Fed, has led to a decrease in demand for fixed income, resulting in the dollar gaining value and bonds sliding. The 10-year Treasury yield has held near its 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 struggling to break above $80,000.
According to Fernando Lillo, director at exchange Zoomex, any break above this level would require the war premium to unwind. Lillo suggests that a possible scenario where the Trump administration lifts the blockade in the coming days, framing it as a response to positive steps by Iran, could trigger a relief rally and pave the way for Bitcoin to consolidate above $80,000 and move towards $85,000.