Bitcoin took a sharp hit on Monday as traditional markets reopened to escalating US-Iran tensions. The leading cryptocurrency dropped to $65,149, erasing gains made after Iran's Supreme Leader Ayatollah Ali Khamenei was reportedly killed. At press time, Bitcoin was trading at $65,751, down 1.9% in 24 hours. Ethereum shed 3.7% to $1,931, Solana fell over 4.5% to $82.27, and XRP lost 4.1% to $1.34.
Brent Crude Spikes 6.4%, Strait of Hormuz in Focus
Crude oil saw its biggest single-day surge since the Russia-Ukraine war. Brent crude initially jumped 13% before settling at $77.50, still up 6.4%. Iran barred vessels from the Strait of Hormuz — a chokepoint for about one-fifth of global oil shipments — according to Bloomberg. Asian stocks fell 1.4%, US equity futures dropped 0.7%, and gold climbed to $5,350 an ounce as investors priced in supply disruption risks.
Inflation Fears Resurface, Fed Rate Cut Hopes Fade
The core concern for crypto is oil's impact on inflation. Sustained high crude prices could push the Federal Reserve to delay rate cuts. With interest rates elevated and liquidity tightening, risk assets like Bitcoin face persistent headwinds. The probability of a September rate cut slid from 70% to below 30% in a week.
Diplomatic Whispers vs. Hardline Stances
Iran's position appears contradictory: the Wall Street Journal reported Tehran is seeking to revive nuclear talks with Washington, while The Atlantic said Trump agreed to engage with Iran's new leadership. But Iran's National Security Chief Ali Larijani rejected negotiations, and Trump vowed to continue bombing until objectives are met.
BTSE COO Jeff Mei noted that Iran's long-standing isolation limits systemic risk to financial markets. While oil volatility may feed inflation, global dependence on Iranian crude has waned, and OPEC plus US production capacity can buffer supply gaps. Still, crypto's near-term path hinges on whether the Strait of Hormuz reopens and how long US military operations last. Until clarity emerges, digital assets will swing as risk assets amid elevated uncertainty.