Hormuz conflict revives rate hike bets, stalls bitcoin recovery
Escalating US-Iran military clashes are driving up oil prices and reviving expectations for a Federal Reserve rate hike, halting bitcoin's recent recovery ahead of key inflation data.
Iran fired ballistic missiles at a US air base in Jordan on Tuesday, prompting a five-hour US attack on Iranian targets. The clashes over the Strait of Hormuz, which handles roughly one-fifth of global oil and gas supplies, have kept the waterway de-facto closed for 136 days.
Brent crude surged nearly 4% to a four-week high, reigniting the so-called Nacho trade, which bets the strategic chokepoint remains shut. Prediction markets now assign a 56% chance of the strait reopening by year-end, down from 65%, with near-zero probability of a resolution this month.
The geopolitical shock is rippling through financial markets, lifting near-term inflation risks and pushing the two-year Treasury yield to 4.28%. European equities dropped about 1%, US index futures fell 0.3%, and the broader CoinDesk 20 index lost 0.6%. The macro shift effectively reverses the "peace trade" that recently pulled bitcoin from its late-June lows, as higher yields reduce demand for rate-sensitive assets.
Traders are now pricing a 36% chance of a Federal Reserve interest-rate increase this month. The focus shifts to June consumer price index data due later today, where headline inflation is forecast to slow to 3.8% from 4.2% year-over-year, while core inflation is expected to hold at 2.9%. A softer print could cool July hike expectations, but hot data would likely solidify them ahead of congressional testimony from Fed Chair Kevin Warsh.
Within the crypto market, alternative coins are showing no signs of momentum against bitcoin, with their market capitalization ratio stagnating at a key resistance level. Underlying exchange activity is expanding, however, as centralized trading volumes rose in June for the first time in five months.
Spot volume climbed 15.3% to $1.11 trillion, while perpetual volumes for real-world assets hit a record $311 billion. Separately, Arkham data shows the US government moved $288 million in seized bitcoin and ether to Coinbase Prime on Monday.
