The resurgence of the Iran war premium has led to a downturn in the cryptocurrency market. Over the past 24 hours, bitcoin has fallen by 2.1% to $75,633, marking a 3% decline over the week, as Brent crude oil prices jumped 7.1% to $126.41 per barrel, the highest level in four years, following an Axios report that President Donald Trump is set to receive a briefing on new military options against Iran.
This development has resulted in the deployment of hypersonic missiles to the Middle East, a first for American forces in combat, and has effectively shut down the Strait of Hormuz, disrupting crude, natural gas, and oil product flows. 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 Brent's price surge, with the global benchmark experiencing a nine-day winning streak, the longest since May 2022, and a year-to-date increase of over 100%. Other cryptocurrencies, such as ether, XRP, and Solana, have also seen declines, with ether dropping 3.4% to $2,244, XRP falling 2.1% to $1.37, and Solana losing 2.6% to $82.62. The only notable exception is dogecoin, which has seen a 3.8% increase over the day and a 10.1% rise over the week to $0.10.
Risk assets are also experiencing losses across the board, with Nasdaq 100 futures, MSCI's Asia Pacific share index, and European equities all seeing declines. The surge in oil prices and a hawkish Fed have led to a decrease in demand for fixed income, resulting in the dollar gaining and bonds sliding.
Bitcoin's ability to withstand the early stages of the war is being tested, with the asset holding a tight band between $74,000 and $78,000 through April despite the conflict entering its third month and oil prices rising from $98 to $126. According to Fernando Lillo, director at exchange Zoomex, any break above $80,000 will require the war premium to unwind, and a resolution to the Middle East conflict would need to occur, leading to a drop in Brent crude oil prices below $100 per barrel.
Lillo also flagged 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' to engineer a relief rally, potentially triggering an influx of capital into risk assets and paving the way for Bitcoin to consolidate above $80,000 and move toward $85,000.