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 dropped 3.4% to $2,244. This downturn is largely attributed to the significant increase in Brent crude oil prices, which have jumped 7.1% to $126.41 per barrel - the highest intraday level in four years.
The surge in oil prices is a direct result of reports that President Donald Trump is set to receive a briefing on potential military options against Iran. The deployment of hypersonic missiles to the Middle East, as requested by US Central Command, would mark the first time American forces have utilized such weapons in combat. The Strait of Hormuz has been effectively shut down since the onset of the war in late February, severely restricting the flow of crude oil, natural gas, and other petroleum products. This has led to a war premium, which refers to the portion of an asset's price driven by conflict risk rather than supply-demand fundamentals.
Brent crude has been carrying a substantial war premium all year, with prices increasing by over 100% year-to-date. The global benchmark is currently on a nine-day winning streak, the longest since May 2022, and has risen by over 100% year-to-date.
Other cryptocurrencies, including XRP and Solana, have also experienced significant declines, with XRP falling 2.1% to $1.37 and Solana dropping 2.6% to $82.62. In contrast, dogecoin has seen a 3.8% increase in value over the past 24 hours, reaching $0.10. The downturn in the cryptocurrency market is mirrored in other risk assets, with Nasdaq 100 futures and European equities experiencing declines.
The US dollar has gained value, while bonds have slid, as the surge in oil prices and a hawkish Fed have reduced demand for fixed income. The 10-year Treasury yield has held near its highest level since July, and 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 $80,000 would require the war premium to unwind. Lillo suggests that a possible scenario where the Trump administration lifts the blockade in 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.