The resurgence of the Iran war premium has taken a toll on the cryptocurrency market. Over the past 24 hours, bitcoin has declined by 2.1% to $75,633, with a weekly loss of 3%, as Brent crude oil prices surged 7.1% to $126.41 per barrel, reaching a four-year high.
This increase in oil prices was driven by an Axios report stating that President Donald Trump is set to receive a briefing on new military options against Iran, which has led to a rise in conflict risk. The potential deployment of hypersonic missiles to the Middle East, as requested by U.S.
Central Command, would mark the first combat use of such weapons by American forces. The Strait of Hormuz has been effectively shut down since late February, disrupting the flow of crude oil, natural gas, and other oil products.
As a result, Brent crude has been carrying a significant war premium all year, with prices increasing by over 100% year-to-date. The global benchmark has now seen a nine-day winning streak, the longest since May 2022, and has risen by over 100% year-to-date.
Other cryptocurrencies, including ether, XRP, and Solana, have also experienced declines, with ether dropping 3.4% to $2,244 and XRP falling 2.1% to $1.37. The only notable exception is dogecoin, which has seen a 3.8% increase in value. Risk assets are generally experiencing a downturn, with the Nasdaq 100 futures erasing earlier gains and MSCI's Asia Pacific share index falling 1.4%. The surge in oil prices, combined with a hawkish Fed stance, has led to a decrease in demand for fixed income, causing the dollar to gain and bonds to slide.
Treasury 10-year yields have held near their highest levels since July, while Japan's 10-year notes have reached their highest level since 1997. The resilience of bitcoin is being tested, as the asset has held a tight band between $74,000 and $78,000 despite the escalating conflict and rising oil prices.
However, each escalation headline has produced a sharper drawdown, and the cumulative damage is starting to show. According to Fernando Lillo, director at exchange Zoomex, any break above $80,000 will require the war premium to unwind. Lillo notes that bitcoin is attempting to break the key $80,000 level, which would necessitate a resolution to the Middle East conflict and a subsequent drop in Brent crude oil prices below $100 per barrel.
A possible scenario where the Trump administration lifts the blockade in the coming days and frames it as a response to "positive steps by Iran" could trigger a relief rally, potentially leading to an influx of capital into risk assets and paving the way for bitcoin to consolidate above $80,000 and move toward $85,000.