Bitcoin fell during today’s trading session as pressure on risk assets continued amid escalating tensions between the United States and Iran and rising U.S. Treasury yields. This prompted investors to reduce their exposure to assets that are particularly sensitive to liquidity conditions. The world’s largest cryptocurrency declined by around 0.8% to $78,299, alongside broader weakness across the cryptocurrency market. At the same time, the sharp rise in oil prices this week intensified concerns that inflation could remain elevated for longer, increasing pressure on interest rate expectations and supporting persistently high bond yields.
Developments in the conflict between Washington and Tehran remained at the center of market attention following one of the fiercest rounds of fighting since the war began in late February. Iran said it had targeted 10 ships in and around the Strait of Hormuz, while the United States announced that it had responded by sinking five Iranian oil tankers. The escalation supported crude prices, with Brent remaining above $100 per barrel, bringing energy driven inflation risks back into focus and increasing the likelihood that the Federal Reserve could maintain a more restrictive policy stance in the coming months.
U.S. Treasury yields also rose sharply this week, adding further pressure on risk assets. The 10 year Treasury yield reached its highest level in three years after the Treasury Department’s announcement of an expansion in longer dated bond buybacks failed to calm the market as much as investors had expected. Persistently elevated yields create a difficult environment for speculative assets that depend heavily on liquidity, including cryptocurrencies. Historically, Bitcoin has tended to perform less favorably during periods of monetary tightening and rising interest rates.
In the oil market, prices remained elevated during Thursday’s session after Brent crude moved above $100 per barrel. Traders are increasingly concerned about deeper supply disruptions as attacks on shipping intensify. Brent futures edged down around 0.1% to $101.10 per barrel, while West Texas Intermediate gained 0.2% to $96.24. Brent has risen by around 30% after attempts to reach a permanent agreement to halt attacks between the United States and Iran failed and fighting resumed later in the month.
The continuation of retaliatory attacks suggests that oil flows from the Gulf region could remain disrupted for an extended period. Shipping through the Strait of Hormuz, which carried roughly one fifth of global oil and gas supplies before the war, remains well below previous levels. Pressure is also increasing on alternative export routes as Iran aligned Houthi forces step up attacks against Saudi Arabia, creating additional risks for crude shipments moving through the Red Sea.
Uncertainty over the actual volume of oil moving through the Strait of Hormuz, together with continued shipping disruptions, remains one of the main factors keeping the physical crude market tight and maintaining a significant geopolitical risk premium in oil prices. This is reflected in the physical Brent benchmark, which is used to price roughly two thirds of global crude supplies and has remained above $100 per barrel since September 3. The U.S. Energy Information Administration has also raised its oil price forecasts for this year and next as global inventories decline following the loss of part of the Middle East’s supply.
Overall, markets are dealing with a difficult combination of escalating geopolitical tensions, higher energy prices, elevated bond yields and renewed inflation concerns. This environment supports oil prices through growing supply risks, while putting pressure on Bitcoin and other risk assets as financing conditions tighten and investors become less willing to take on risk.
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