Recently, as Israel launched airstrikes on Iranian energy facilities and faced retaliation, the Middle East has once again plunged into a tense situation. Rumors about potential blockades of ports, oil fields, and the Strait of Hormuz have surged, triggering significant fluctuations in the global energy market. The most immediate impact of this wave of energy shocks is a notable increase in inflationary pressures, further raising concerns in the market about whether central banks can cut interest rates as scheduled, which in turn creates a secondary transmission effect on crypto assets.
For a long time, rising oil prices have had a clear driving effect on global inflation. According to the latest analysis from JPMorgan, every $10 increase per barrel could raise the U.S. CPI inflation rate by about 0.5 percentage points. Meanwhile, the UK Chancellor of the Exchequer and former senior executives of BP have also warned that if the Middle East conflict leads to a blockade of the Strait of Hormuz, the rise in oil prices may not stop in the short term, thereby causing global inflation to continue to rise and weakening expectations for interest rate cuts.
This inflation shock chain is not limited to traditional financial markets. Data shows that although the Asian market remains resilient under the dual pressure of rising oil prices and increasing inflation expectations, the market generally judges that the Federal Reserve will at least maintain interest rates at this month's meeting, which weakens expectations for rate cuts and temporarily tightens liquidity support for risk assets.
In fact, the crypto market has already shown a clear response recently. Major cryptocurrencies such as Ethereum (ETH), Ripple (XRP), and Solana (SOL) have all declined, with drops concentrated between 3% and 9%. Bitcoin has also fallen below the $103,000 mark, with its market value evaporating by over several billion dollars.
Regarding the inflation spillover pressure caused by rising oil prices, many analysts point out that this is a mechanism of "inflation contagion": rising oil prices push up costs (transportation, manufacturing), further leading to an increase in consumer goods prices, thereby raising the overall price level. When inflation expectations rise, the monetary policy flexibility of the Federal Reserve and other central banks will be constrained, forcing the market to shift funds from high-risk assets to safe-haven assets such as the U.S. dollar and gold, which will increase pressure in the short term.
Therefore, the Middle East conflict not only raises energy prices but also boosts global inflation expectations and strengthens the appeal of the dollar and traditional safe-haven assets, making the crypto market a "passive victim." This also challenges the notion that "Bitcoin = digital safe-haven asset" — at least under the short-term inflation shock, crypto assets appear more like traditional risk assets.
However, this does not mean that the long-term potential of crypto assets has disappeared. Several institutional funds have been buying against the trend during the recent pullback, with the underlying logic being to include crypto assets in a strategy basket to hedge against inflation or economic uncertainty. Coupled with the increasing clarity of global regulations and the continued flow of funds into spot ETFs, industry insiders believe that this pullback may be a phase of "adjustment window" rather than a structural collapse of confidence.
From a technical perspective, Bitcoin's current support level is around the $102,000 to $104,000 range, where there is intense competition between bulls and bears. If geopolitical risks ease and central banks adopt a dovish stance, a phase of rebound may occur; however, if the conflict continues and oil prices soar again above $80 per barrel, inflationary pressures will be solidified, and market patience for risk assets may further diminish.
In light of this situation, investors should consider three major strategies: first, be wary of the secondary shock to inflation driven by rising oil prices; second, adjust asset allocation based on central bank attitudes, currently meaning reducing exposure to high leverage risks; third, plan phased cost strategies for medium to long-term holdings. For example, build positions at low levels but not fully invest, retaining liquidity to cope with ongoing uncertainties.
In summary, the inflation pressure triggered by oil prices due to the Middle East conflict, through the pathways of monetary and capital flows, has formed a significant impact on the crypto industry. This mechanism has not only been validated this week but also provides a reference for crypto investors' response measures in similar future events. In the post-pandemic era intertwined with global economic instability, mastering the interconnected logic of inflation and geopolitical risks will become a key capability for investors to protect and position themselves.
Related: The U.S. Senate will vote on the revised stablecoin bill on June 17.
Original: “Middle East Conflict Fuels Inflation Fears, Crypto Market Faces Chain Reaction”
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