Bitcoin Outperforms Risk Assets Amid Oil Rally Driven by Iran War Fears

Bitcoin Faces Turbulence Amid Rising Oil Prices and Geopolitical Uncertainty

At the start of the week, Bitcoin experienced significant price swings as escalating tensions in Iran pushed oil prices sharply higher, unsettling financial markets worldwide.

During early European trading, Bitcoin briefly climbed above $68,000, holding onto a modest 0.5% gain by 6:30 a.m. in London. Earlier, the cryptocurrency had dropped as much as 2.4% to $65,633—its lowest point in a week—after a surge in oil prices. Brent crude soared by up to 29%, reaching $119.50 per barrel, marking its largest single-day jump since April 2020. This dramatic move triggered widespread declines across equities, bonds, and most major currencies.

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Asian markets also suffered, with South Korea’s Kospi index tumbling as much as 8.8%. The US dollar, often seen as a safe haven during inflationary periods, strengthened against nearly all other major currencies. US Treasury bonds were sold off, pushing the yield on the 10-year note to its highest level in a month.

Damien Loh, Chief Investment Officer at Ericsenz Capital, noted that Bitcoin’s resilience compared to other risky assets suggests that most leveraged long positions have already been cleared. He also mentioned that a slight retreat in oil prices later in the day prompted short sellers in Bitcoin to close their positions.

Despite these developments, investor sentiment remains cautious due to concerns that persistently high energy prices could drive inflation even higher.

“The ongoing conflict in the Middle East has shifted from a single military incident to a prolonged period of economic disruption,” explained Hayden Hughes, Managing Partner at Tokenize Capital. He also pointed out that investors are closely watching for the upcoming release of US consumer price index data this week.

Institutional investors have shown increased wariness, pulling funds from exchange-traded funds. By the end of last week, net flows had turned negative again. Since November, US-listed spot Bitcoin ETFs have experienced nearly $6 billion in net outflows, according to Bloomberg data.

Hughes identified $64,000 as the immediate support level for Bitcoin, with the next key support at $61,000 if that threshold is breached. On the upside, $68,000 serves as the next resistance point.

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