Original Title: Wall Street’s Inflation Alarm From Iran—What It Means for Crypto
Original Author: Oihyun Kim, BEINCERYPTO
Original Translator: Saoirse, Foresight News
TL;DR
· Driven by the situation in Iran, oil prices surged, reigniting inflation fears in the market, with U.S. Treasury yields recording the largest single-day increase since October.
· Yellen warned that the Federal Reserve is now "more inclined to stay put," while Dimon termed inflation a potential "skunk at the party" (referring to something that spoils the fun).
· Boosted by inflows into safe-haven assets, Bitcoin rose 5.7%, but persistently high interest rates could pose challenges to the bullish outlook for cryptocurrencies.
Wall Street is sounding the inflation alarm. From the bond market to corporate executive levels, more signals indicate that U.S. and Israeli strikes against Iran may reignite price pressures that the Federal Reserve has been trying to suppress for years—this could have significant implications for interest rates, risk assets, and the cryptocurrency market.
The question now is: will the oil shock triggered by the situation in Iran become the catalyst that disrupts the interest rate cut timeline Wall Street has been hoping for?
Bond Market Reacts First
The Treasury market quickly priced in this threat. On Monday, the yield on the 10-year U.S. Treasury bond surged 10 basis points to 4.03%, marking the largest single-day increase since October last year. Meanwhile, tanker transport in the Strait of Hormuz was nearly completely disrupted, with oil prices soaring over 6%.
Expectations for rate cuts also significantly cooled. Traders now generally expect the Federal Reserve won't cut rates until at least September, and the expectation for a third rate cut in 2026 has almost vanished. Just a few weeks ago, the market was still relatively optimistic about a loosening cycle.
The signals from the bond market are clear: Inflation risks are rising again, and the Federal Reserve might be handcuffed.
Yellen and Dimon Issue Warnings
On Monday, two of the most influential figures in U.S. finance further reinforced this signal.
Former Treasury Secretary Janet Yellen warned that the conflict in Iran makes the Federal Reserve "more inclined to stay put," and decision-makers would be more reluctant to cut rates. Speaking at the S&P Global TPM26 shipping conference, she noted that the current U.S. inflation rate is about 3%, a full percentage point above the Fed's 2% target, with Trump's tariff policies contributing approximately 0.5 percentage points.
Her deeper concern lies at a psychological level. She stated that the Federal Reserve must be vigilant against the market forming the perception that "inflation has indeed dropped to 3%, but the Fed doesn’t really want to push it back to 2%." Once this expectation solidifies, it could allow high inflation to become entrenched long-term—exactly the scenario the central bank dreads.
JPMorgan CEO Jamie Dimon echoed a similar sentiment, warning that inflation could become the "skunk at the party" for the U.S. economy, disrupting the overall atmosphere. He acknowledged that short-term conflicts have limited impact on inflation but stated that if conflicts prolong, the situation would be entirely different.
What Inflation Means for Various Markets
If inflation proves to be more stubborn than anticipated, its effects will ripple across all asset classes.
For the stock market, prolonged high interest rates would compress valuations, especially impacting growth and tech stocks that are sensitive to discount rates. Monday's market action foreshadowed this: the S&P 500 fell over 1% during the session before barely closing flat; defensive sectors like energy and defense gained strength, while airline stocks plummeted.
The situation is more complex for cryptocurrencies.
On Monday, despite bond sell-offs, Bitcoin still rose 5.7% to $69,424. Many interpreted this as: In the face of geopolitical uncertainty and inflation worries, funds are flowing into hard assets for safety. The gold price surpassing $5,300 also confirms this logic.
However, persistently high interest rates will challenge the bull case for cryptocurrencies. The bear market of 2022 has already proven that when liquidity tightens and the Fed turns hawkish, digital assets can undergo severe revaluation. If rate cut expectations continue to recede, the risk appetite in the crypto market may face pressure in the coming months.
Not Everyone Is Bearish
Of course, Wall Street has not reached a consensus on a "doomsday scenario."
Lead strategist Mike Wilson of Morgan Stanley stated that as long as oil prices do not spike significantly and persistently, the Middle East conflict is unlikely to ruin their optimistic outlook for U.S. stocks. JPMorgan's equity team views an escalation of the conflict as a potential buying opportunity, believing that fundamentals remain strong.
Senior strategist Louis Navellier is even more optimistic, predicting that if Iran sees pro-Western leadership and oil exports resume, military actions will ultimately "eliminate significant uncertainty" and trigger a rebound.
The Atlantic Council also takes a cautious stance, pointing out that global energy infrastructure remains intact, the supply fundamentals before the conflict are healthy, and the real variable is the duration of the conflict, not the strikes themselves.
The Key Question: How Long Will It Last
Ultimately, all predictions point to the same variable: how long the Strait of Hormuz will be effectively blocked.
If it resolves within days, the inflation impact is likely just a temporary spike in energy prices—painful but manageable.
However, if the disruption lasts for weeks, it could combine with seasonal gas transitions in the summer, stubborn core inflation, and price pressures from tariffs, forming a "pressure combination" that forces the Federal Reserve to maintain a tight policy throughout 2026.
For crypto investors, this means that geopolitical factors are as important as on-chain indicators. Bitcoin may rise today due to safe-haven inflows, but if Yellen and Dimon are correct in their assessments of inflation trajectories, the crypto market may face a tougher road before improving.
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