The resurgence of the Iran war premium has taken a toll on the cryptocurrency market. Over the past 24 hours, bitcoin has fallen 2.1% to $75,633, marking a 3% decline over the week, as Brent crude oil prices jumped 7.1% to $126.41 per barrel - the highest level in four years - following reports that President Donald Trump is set to receive a briefing on potential military action against Iran.
The deployment of hypersonic missiles to the Middle East, as requested by U.S. Central Command, would be a first for American forces in combat, further exacerbating the conflict. The Strait of Hormuz has been effectively closed since late February, severely restricting the flow of crude oil, natural gas, and other petroleum products.
This situation has led to a war premium, where the price of an asset is influenced by the risk of conflict rather than traditional supply and demand dynamics. As a result, Brent crude oil prices have increased by over 100% year-to-date, with the global benchmark currently on a nine-day winning streak - the longest since May 2022.
Ether has dropped 3.4% to $2,244, while XRP has fallen 2.1% to $1.37, and Solana has declined 2.6% to $82.62. The only notable exception in the top 10, excluding stablecoins, is dogecoin, which has risen 3.8% to $0.10.
Risk assets are experiencing losses across the board, with the Nasdaq 100 futures giving up earlier gains and the MSCI Asia Pacific share index decreasing 1.4%. The surge in oil prices and a hawkish Fed have led to decreased demand for fixed income, causing the dollar to gain and bond prices to slide. The 10-year Treasury yield remains 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 initial stages of the war is being tested, with the asset struggling to break above $80,000. According to Fernando Lillo, director at exchange Zoomex, a break above this level would require a resolution to the conflict in the Middle East and a subsequent drop in Brent crude oil prices below $100 per barrel. Lillo suggests that a potential lifting of the naval blockade of Iran could trigger a relief rally, leading to an influx of capital into risk assets and potentially paving the way for bitcoin to consolidate above $80,000 and move towards $85,000.