Shares of stablecoin issuer Circle (CRCL) are up over 20% this week, outperforming the broader market following Israeli and US airstrikes on Iran over the weekend.
Japanese bank Mizuho attributed the rise in part to a sharp rise in oil prices as tensions in the Middle East exploded. Higher crude oil prices could revive inflationary pressures and lower expectations of Federal Reserve interest rate cuts.
That dynamic matters to Circle. The company earns the bulk of its revenue from interest income on the US government debt it holds as reserves backing its USDC stablecoin. Higher interest rates translate into higher returns on these reserves, which directly supports revenues. Conversely, interest rate cuts compress this income stream.
Since the US and Israeli attacks on Iran over the weekend, WTI crude has risen about 7%-8% on heightened geopolitical risk and concerns about supply disruptions.
Crypto markets were shaken by the outbreak of war in the Middle East on Saturday with bitcoin sliding sharply in early trade amid a broader risk-off move, but prices have since stabilized.
Analysts Dan Dolev and Alexander Jenkins estimated that reduced rate cut expectations add about 1% to their Circle 2026 and 2027 revenue forecasts.
More importantly, the analysts pointed to a doubling in the “real tail risk” of a no-rate-cut scenario in 2026, according to Chicago Mercantile Exchange (CME) FedWatch data, a shift that could further support Circle’s valuation multiple.
A rise of around 5% in bitcoin over the past 24 hours may also contribute to positive sentiment. The largest cryptocurrency is currently trading around $68,100.
The bank raised its Circle price target to $100 from $90, while maintaining a neutral rating on the stock. The stock traded 6% higher at $101.90 on the announcement.
While higher-for-longer interest rates are a short-term positive, long-term revenue growth could face pressure as stablecoins become increasingly commoditized, the report added.
Circle shares rose more than 45% last week in a fierce short squeeze after fourth-quarter earnings. This move captured what had been a brutal 80% reduction from record hits last year.
Read more: Circle’s post-earnings rise nears 50% as cards squeeze, not strong economic conditions fuel rally
