Bitcoin and global stock markets have stabilized after an early week sell-off and oil price surge triggered by the outbreak of military conflict between the US, Israel and Iran. However, bond markets are signaling caution as rising interest rates signal renewed inflation concerns and waning bets on Fed rate cuts.
BTC, the leading cryptocurrency by market cap, traded above $70,000 on Friday, up nearly 10% for the week. Prices briefly rose to nearly $74,000 on Wednesday after falling to around $65,000 over the weekend as geopolitical tensions rattled markets.
The recovery has been reflected in stock futures. Contracts linked to the S&P 500 fell to a multi-week low of 6,718 points on Tuesday before reversing to around 6,840 at the time of writing.
The first risk-off move came as oil prices rose on reports that Iran had blocked oil tankers in transit through the Strait of Hormuz, a critical choke point for global crude supplies. Markets stabilized after the United States moved quickly to quell fears, promising naval escorts and political risk insurance for oil and gas tankers sailing through the strait.
Still, the bond market remains unsettled.
The yield on the 10-year US Treasury note has risen for four consecutive days, rising from 3.93% to 4.15%. Bond prices move inversely in relation to interest rates. Meanwhile, the two-year yield, which is more sensitive to interest rate expectations, has risen from 3.37% to nearly 3.60%.
The move in higher interest rates suggests traders are reassessing the outlook for monetary policy as the conflict-driven rise in energy prices threatens to revive inflationary pressures.
According to CME Fed funds futures, investors now see less than a 50-50 chance of two 25-basis-point Fed rate cuts this year, down from nearly 80% before the conflict began.
“The steering wheel market is revealing the excitement of this rally,” Bryan Tan, a trader at leading digital asset market maker Wintermute, said in an email, noting the rise in dividends.
“The conflict between a resilient economy (ISM Services at 56.1, ADP at +63K vs. +50K expected) and an inflationary energy shock is historically the kind of setup that keeps the Fed frozen for longer. The Warsh nomination, which officially hits the Senate this week, adds another layer of hawkish uncertainty,” Tan added.
Some observers note that the inflationary impact of oil shocks typically unfolds gradually across the global economy, suggesting that interest rates could remain high in the coming weeks and potentially limit the upside of risk assets such as stocks and cryptocurrencies.
“After major geopolitical shocks, oil prices usually rise gradually for weeks. The average pattern shows that oil typically rises 20-30% within ~60 days of the shock,” explained analyst Jack Prandelli at X. “Markets often underprice the first phase of supply risk. The real movement tends to happen when physical disruptions start to appear in flows and inventories.”
The recent strong economic data in the US has also contributed to the increase in interest rates and the reduction of expectations for interest rate cuts. Data released on Tuesday showed that economic activity in the US services sector continued to grow in February, with the ISM index rising to 56.1. The ADP private payrolls report showed 63,000 job creations in February, the strongest reading since July 2025.
Attention now turns to Friday’s nonfarm payrolls report and figures for wage increases. A hotter-than-expected print could further weaken expectations for Fed interest rate cuts and add new volatility to financial markets.
