Geopolitical conflicts trigger sharp fluctuations in cryptocurrency prices, with soaring oil prices putting pressure on the market

As the US-Iran situation heats up, the global energy markets are experiencing intense volatility, and this shockwave is directly impacting the cryptocurrency market. This week, cryptocurrency prices faced downward pressure, with major coins like Ethereum and Solana experiencing significant declines, reflecting the fragility of risk assets amid geopolitical uncertainties. Currently, Bitcoin is priced at $67,040, down 1.62% over 24 hours; Ethereum has fallen to $1,950, a 1.68% decrease.

From Oil Price Surge to Cryptocurrency Price Decline

On Monday, after traditional markets reopened, cryptocurrency prices weakened accordingly. Brent crude oil initially surged nearly 13% at opening, then retreated slightly but still rose 6.4%, marking the largest single-day gain since the Russia-Ukraine conflict in 2022. The sharp fluctuations in energy prices directly suppressed the entire risk asset sector, including cryptocurrencies.

Over the weekend, Bitcoin rebounded to $68,000, but this rally was short-lived. As markets reassessed the escalation of the US-Iran conflict and the potential blockade of the Strait of Hormuz, cryptocurrency prices retreated again, returning to the pre-conflict mid-range around $66,000. This demonstrates the deep impact of geopolitical risks on market sentiment—uncertainty alone is enough to pressure risk assets.

Divergence Among Major Coins, Solana Leads Decline

The crypto market showed mixed performance this week. The original data indicated Ethereum fell 2.5% to $1,967; the latest quote is $1,950, a 1.68% drop. Solana performed the worst, dropping 2.48% in 24 hours to $82.45, with a total decline of 6.31% over the past week, making it the biggest loser among major coins. XRP also declined, down 1.17% in 24 hours to $1.35.

This divergence reflects rising risk aversion among investors. They tend to sell off highly volatile assets, which is characteristic of smaller-cap coins like Solana. In contrast, Bitcoin, often seen as a “safe haven” in crypto, experienced a more moderate decline.

How Rising Inflation Expectations Influence Federal Reserve Decisions

The key impact of soaring energy prices is the shift in inflation outlook. Rising oil prices directly increase energy costs, which in turn push up overall price levels—counteracting the Federal Reserve’s goal to lower inflation.

Market pricing has shifted expectations for Fed rate cuts. Traders previously anticipated a timetable for rate reductions, but this has been delayed, indicating that liquidity will not significantly loosen in the near term. For liquidity-driven assets like cryptocurrencies, this tightening outlook directly depresses valuations. The continued rise in bond yields further confirms this trend, putting pressure on the revaluation of risk assets across the board.

Reasons Why Cryptocurrency Downside Is Limited

Despite short-term pressures, many market analysts believe further downside in crypto prices may be limited. Jeff Mei, COO of BTSE, stated, “Given that Iran has been long isolated from the global financial markets, we see limited downside risk. Some worry about oil prices and their potential impact on inflation, but the world has gradually reduced dependence on Iranian oil, and increased supplies from OPEC and the US should be enough to stabilize prices.”

This assessment points to a core issue: the Strait of Hormuz accounts for about one-fifth of global oil flows. Its operational status will determine the actual tightness of global oil supply. If the strait remains open, alternative supplies from OPEC and the US will be sufficient to ease concerns in the energy markets, making further declines in crypto prices unlikely.

Geopolitical Developments Still Uncertain

The current situation continues to evolve. Markets receive conflicting signals regarding whether Iran seeks to restart nuclear negotiations with the US. The Wall Street Journal reports new US negotiations are underway, while Iran’s national security chief Ali Larijani states the country will not negotiate.

Such political uncertainty is itself a source of crypto price volatility. Every piece of news or statement can trigger market re-pricing. Until the situation in the Strait of Hormuz clarifies and the extent of US-Iran conflict escalation is confirmed, cryptocurrencies—being risk assets—will continue to trade with high volatility.

In this world where risk levels have just increased, crypto performance will depend on two key variables: first, whether the geopolitical situation will further escalate; second, the actual extent of damage to energy supply chains. Only when both issues have clear answers can the crypto market potentially emerge from its current uncertainty.