Oil Shock Risk as U.S. Policy Escalation Keeps Energy Bid; Bitcoin’s $68K Pivot Becomes a Liquidity Test
Digital Asset Market: Bitcoin fell about 3% from its recent high of $70,000 to around $68,000 amid escalating Middle East tensions and the closure of the Strait of Hormuz, which fueled fears of oil supply disruptions, higher inflation, and a broader global sell-off. Stocks also dropped, with the S&P 500 and Nasdaq down roughly 2%, while oil turned volatile and even gold declined toward $5,000 support, offering little safe haven. This move also reinforces the idea that when risk rises, Bitcoin often fails to behave as a defensive asset, as its “digital gold” narrative suggests. Analysts said the market is pricing in a longer war, and traders noted that Bitcoin bulls lack momentum after losing key trend lines such as the 2021 top and the 21-day SMA, leaving bears in control and raising the risk of another extended consolidation similar to March through November 2024.
Macroeconomics: China is urging an immediate ceasefire in the Iran conflict and calling on all parties to prevent escalation and ensure safe commercial shipping through the Strait of Hormuz, a vital energy chokepoint that has reportedly become paralyzed amid threats from Iran’s Revolutionary Guards. Beijing is highly exposed to discounted Iranian crude, with roughly 80% of Iran’s oil exports, about 1.6 million barrels per day, going to China, so Chinese officials are reportedly pressing Iran not to disrupt tanker traffic, Qatari gas exports, or major export hubs. The report also cites renewed drone attacks on Gulf energy infrastructure, including a strike that reportedly forced Saudi Arabia’s largest refinery offline, and frames the conflict as closely tied to China’s energy needs. It adds that upcoming U.S.-China trade talks and a potential Trump-Xi summit may be influenced by U.S. pressure on Iran and Venezuela, two key sources of cheap crude for Beijing.
Equities: U.S. stocks fell sharply on Tuesday, giving back Monday’s rebound as the Israel-U.S.-Iran conflict appeared to deepen and last longer than investors had hoped. The Dow dropped about 850 points to more than 1,100 points at points in the session, while the S&P 500 and Nasdaq slid roughly 1.5% to more than 2%, with every sector lower except energy and cyclical groups like materials, industrials, and consumer discretionary leading declines. Oil surged again, with Brent topping about $84 and WTI above $77, lifting Treasury yields on renewed inflation fears and undermining expectations for Federal Reserve rate cuts, while the VIX jumped to its highest since November and gold reversed lower. Markets were rattled by warnings that the Strait of Hormuz could be closed, reports of broader attacks across the region including strikes on infrastructure and drones hitting the U.S. embassy in Riyadh, and concerns about European natural gas after disruptions tied to Qatar LNG, while some individual stocks also moved on company specific news, including a drop in Blackstone after reported fund outflows and mixed premarket reaction to Target ahead of earnings elsewhere.
The Fed and US Treasury: New York Fed President John Williams said monetary policy is well positioned and that additional interest rate cuts could still be warranted if inflation continues to cool as he expects, though his prepared remarks did not discuss the economic implications of the Iran conflict, even as markets react to war-driven energy price increases that could lift inflation and reduce expectations for near term cuts. He said the U.S. economy remains on a solid footing and should grow 2.5% this year, supported by fiscal stimulus, favorable financial conditions, and strong AI investment, while the labor market has stabilized and unemployment may edge lower this year and in 2027. Williams also said tariffs have been a notable source of inflation in 2025 but should fade by midyear, with PCE inflation easing to about 2.5% this year and returning to 2% in 2027, and he argued most tariff costs are borne domestically rather than by foreign producers.
Geopolitical: The U.S.-Iran war is in its fourth day and expanding across the Middle East, with U.S.-Israel strikes on Iran met by Tehran’s counterattacks. The U.S. has closed its embassies in Saudi Arabia and Kuwait, and U.S. military leaders say more forces are heading to the region, while President Trump called the campaign a last chance to strike and outlined its objectives. Markets sold off globally as stocks fell in the U.S., Europe, and Asia, gold futures rose while spot gold turned lower, and oil prices jumped as supertanker rates hit record highs amid reports Iran closed the Strait of Hormuz and threatened vessels attempting to transit. U.S. gasoline prices are expected to climb to about $3.35 per gallon from roughly $3.10. The conflict is also disrupting regional tech infrastructure, with Amazon Web Services reporting drone attacks knocked multiple Middle East data centers offline, while Israel said it reinforced forces in southern Lebanon and dismantled the Iranian regime’s headquarters. Israel long wanted to take a slab of Lebanon, and now it is likely to seize the opportunity while all eyes are focused on Iran.
View from our desk
$68K Bitcoin Is a Pivot Level, Not a Range
Bitcoin rarely “rests” at psychologically charged levels like ~$68K because price is still primarily a liquidity and positioning instrument, not a slow-moving macro asset. When the market is healthy, $68K becomes a launchpad because spot demand absorbs dips and derivatives positioning rebuilds constructively; when the market is fragile, it becomes a ceiling because rallies are sold to reduce risk and basis compresses as marginal buyers step back. In practice, the tape tends to resolve into one of two regimes: momentum-following continuation (spot-led with stable funding and contained liquidations) or a leverage purge (derivatives-led with cascading forced sells). So the right question is not “is $68K support,” it’s “is sponsorship real,” and you can read that in flows, open interest behavior, and whether drawdowns get bought without reflexive liquidation spikes.
Bitcoin’s Edge Is Monetary Optionality, Not Stability
Bitcoin’s core value proposition is monetary optionality: a bearer-like asset that can settle globally without permission and is harder to dilute by politics or discretionary issuance. That matters most in edge-case environments that are becoming more common: policy credibility shocks, capital flight episodes, sanctions regimes, and friction in cross-border settlement. But that same optionality does not make it a stable medium of exchange today, and it certainly does not justify leveraged exposure as if volatility is a feature you can finance cheaply forever. The institutional way to own it is closer to disciplined risk budgeting than ideology: keep it unlevered, size it like a volatile diversifier, and define rebalancing rules so you are not forced to sell into stress. That framing respects what Bitcoin is good at, while avoiding the repeated trap of treating a long-duration hedge like a short-duration “can’t lose” trade.
War Risk Is a Rates and Energy Problem Disguised as Geopolitics
From a markets perspective, the hard part is that “winning” conditions are vague while escalation pathways are plentiful. Even when tactical objectives are met, adversaries can often replace personnel, shift tactics, and sustain pressure through asymmetric tools, which stretches timelines and keeps uncertainty elevated. That uncertainty does not stay in geopolitics, it gets priced through energy and term premium: oil and LNG risk premia rise, inflation tails get fatter, and rate cuts become harder to price with confidence. Europe is typically the first pressure valve because of higher marginal sensitivity to supply disruption, while the U.S. channel is tighter financial conditions via higher real yields and a stronger USD. For crypto, that mix usually means thinner liquidity, more violent liquidations on breaks, and a higher bar for sustainable upside unless spot demand is strong enough to offset the macro drag.
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The 1Konto Team
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