The resurgence of the Iran war premium has had a profound impact on the cryptocurrency 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 decline is attributed to the surge in Brent crude oil prices, which have risen by 7.1% to $126.41 per barrel, the highest intraday level in four years. The increase in oil prices is a direct result of reports that President Trump is being briefed on potential military options against Iran.
The deployment of hypersonic missiles to the Middle East, as requested by U.S. 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, severely restricting the flow of crude oil, natural gas, and oil products. The war premium, which refers to the portion of an asset's price driven by conflict risk rather than supply-demand fundamentals, has been a significant factor in the rise of Brent crude oil prices.
The global benchmark has been on a nine-day winning streak, the longest since May 2022, and has increased by over 100% year-to-date. 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. The only notable exception is dogecoin, which has risen by 3.8% to $0.10. The sell-off 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's Asia Pacific share index has fallen by 1.4%. European equities are also expected to decline by 1% at the open.
The dollar has gained, and bonds have slid, as the surge in oil prices and a hawkish Fed have reduced demand for fixed income. The 10-year Treasury yields have held near the highest level since July, while Japan's 10-year notes have reached the highest level since 1997. Bitcoin's resilience in the face of the ongoing war is being tested, with the asset struggling to break above the $80,000 level. 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 the coming days, framing it as a response to 'positive steps by Iran,' could trigger a relief rally. A potential lifting of restrictions in the region and lower oil prices could lead to an accelerated influx of capital into risk assets, paving the way for Bitcoin to consolidate above $80,000 and move toward $85,000.