Key Points
- Oil prices increased slightly following a U.S. airstrike on Iran, with Brent crude peaking at $77.79 before decreasing.
- Bitcoin has surpassed $101,000, recovering from a dip below $98,000, amid worries of potential increases in oil prices.
- Analysts believe Iran’s threats regarding the Strait of Hormuz are more rhetorical than actionable, suggesting little immediate impact on oil transportation.
American poet Charles Bukowski famously said: “The crowd is always wrong.” This sentiment reflects the current climate in financial markets clearly.
Just a day prior, many on social media voiced concerns that a U.S. attack on Iran’s nuclear facilities, alongside discussions about Iran potentially closing the Strait of Hormuz, could lead to a dramatic rise in oil prices, dragging down stocks and cryptocurrencies.
However, reality has proven different. Oil prices have risen by only about 3% across the Atlantic, with most of those gains already reversed, as reported by TradingView.
Currently, Brent oil is trading around $77, up only 1.4% for the day, while West Texas Intermediate (WTI) peaked at $78.58 before dropping back to $76.75.
Meanwhile, Bitcoin, the dominant cryptocurrency by market capitalization, has stabilized above $101,000 after fearing a potential spike in oil prices might drive it below the $98,000 mark on Sunday, which resulted in increased volatility in options trading. S&P 500 futures are trading 0.3% lower.
The subdued oil response implies that the market may not expect Iran to act on its threats to halt activities in the Strait of Hormuz — a strategic avenue for oil that might disrupt key Asian allies, notably China.
“The price movements today reflect a lack of belief that flows through Hormuz will be interrupted, with Brent oil dropping back below the $80 benchmark after a brief spike above that level,” analysts at ING noted in a message to clients.
With over 80% of oil shipments through Hormuz destined for Asia, the implications for that region are greater than for the U.S. As such, Iran would need to consider not irritating allies like China by hampering oil deliveries.
Anas Alhajji, an expert in energy markets, stressed that Iran’s rhetoric about closing the Strait often serves domestic interests, echoing similar threats from the past decades. Closing the Strait could trigger significant military conflict due to defense agreements with the Gulf Cooperation Council (GCC).
For Iran, blocking the Strait means occupying foreign waters, a move that could backfire against its own interests as nations not importing Iranian oil could find alternative routes, rendering Iran’s threats fruitless.
BTC Resilience
As it stands, fears surrounding a substantial oil price hike seem unlikely in the near term, which might allow Bitcoin and other financial assets to avoid a market downturn. A surge in oil prices could induce stagflation in major economies, a detrimental outcome for various assets including Bitcoin.
Bitcoin’s recent price action indicates stability above a crucial support level of $100,430, which buyers defended, pushing prices higher subsequently.
The subdued market response this time suggests historical trends may indeed repeat, unless a breakdown below this price point shifts interest towards the intersection of the 100 and 200-day moving averages around $95,900.
