The resurgence of the Iran war premium has negatively impacted the crypto market. Over the past 24 hours, bitcoin has fallen by 2.1% to $75,633, while ether has dropped by 3.4% to $2,244. This downturn is attributed to the significant increase in Brent crude oil prices, which have reached a four-year high of $126.41 a barrel. The rise in oil prices is a result of the escalating tensions between the US and Iran, with reports suggesting that the US is considering military action.
The Strait of Hormuz, a critical oil passage, has been effectively shut down since the conflict began, leading to a surge in oil prices. The war premium, which refers to the portion of an asset's price driven by conflict risk, has been a significant factor in the rise of Brent crude oil prices, with the global benchmark experiencing a nine-day winning streak.
Other cryptocurrencies, including XRP and Solana, have also experienced declines, while dogecoin has seen a 3.8% increase. The downturn in the crypto market is also reflected in the broader risk assets, with the Nasdaq 100 futures and European equities experiencing declines. The surge in oil prices and a hawkish Fed have led to a decrease in demand for fixed income, resulting in a rise in Treasury 10-year yields. Bitcoin's ability to withstand the early stages of the war is being tested, with the asset struggling to break above the $80,000 level.
According to Fernando Lillo, director at exchange Zoomex, a break above $80,000 would require a resolution to the Middle East conflict and a subsequent drop in Brent crude oil prices. Lillo suggests that a possible scenario where the US lifts the blockade on Iran could lead to a relief rally and an influx of capital into risk assets, potentially paving the way for Bitcoin to consolidate above $80,000 and move towards $85,000.