The resurgence of the Iran war premium is having a significant impact on the cryptocurrency market. Over the past 24 hours, Bitcoin has fallen by 2.1% to $75,633, while Ether has declined by 3.4% to $2,244. 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 increase in oil prices is a direct result of reports that President Trump is being briefed on new military options against Iran, with the US Central Command requesting the deployment of hypersonic missiles to the Middle East. The Strait of Hormuz has been effectively shut down since the conflict began, severely restricting 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 up its value by over 100% year-to-date. The global benchmark has now experienced a nine-day winning streak, its longest since May 2022.
Other cryptocurrencies, including XRP and Solana, have also suffered losses, with XRP falling by 2.1% to $1.37 and Solana declining by 2.6% to $82.62. In contrast, Dogecoin has experienced a 3.8% increase in value over the past 24 hours, reaching $0.10. The downturn in the cryptocurrency market is part of a broader trend, with risk assets declining across the board. The Nasdaq 100 futures have erased earlier gains, while the MSCI Asia Pacific share index has fallen by 1.4%.
The surge in oil prices, combined with a hawkish Fed, has led to a decrease in demand for fixed income, resulting in a rise in the dollar and a decline in bonds. 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 conflict 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 will require a resolution to the Middle East conflict and a subsequent drop in Brent crude oil prices below $100 per barrel.
Lillo suggests that a possible scenario could involve the Trump administration lifting the naval blockade of Iran, framing it as a response to 'positive steps' by Iran, and triggering a relief rally. This could potentially lead to an influx of capital into risk assets, paving the way for Bitcoin to consolidate above $80,000 and move towards $85,000.